In an SEC administration proceeding (In the Matter of Thomas S. Albright, SEC Release No. 34-63676), the SEC issued a cease-and-desist order and imposed a bar upon a portfolio manager of a registered investment adviser from association with, among others, brokers, dealers, investment advisers, municipal securities dealers, or advisers, with the right to reapply for association after one year. According to the SEC, the portfolio manager, while co-managing a fund operated and managed by his employer, an investment adviser, engaged in deceptive conduct and a breach of fiduciary duty by charging additional “credit monitoring fees” to bond issuers for functions that were part of the manager's regular responsibilities as manager of the fund. Apparently, the investment adviser was not aware of the fees charged by the portfolio manager. The matter came to the attention of the investment adviser when the portfolio manager reported the source of outside income to his employer/investment adviser.
The SEC charged that while conducting such activities, the portfolio manager violated provisions of both the Investment Company Act of 1940 and the Investment Advisers Act of 1940 (primarily under the “anti-fraud” provisions under the Advisers Act). The manager also was ordered to pay disgorgement, interest, and a civil penalty (in total, more than $300,000).