U.S. securities regulators have charged a former portfolio manager at Oppenheimer & Co. with misleading investors about the valuation and performance of a fund of private equity funds, the Oppenheimer Global Resource Private Equity Fund I L.P.
The U.S. Securities and Exchange Commission (SEC) says that its investigation found that Brian Williamson disseminated quarterly reports and marketing materials to prospective investors misstating that the valuation of a fund’s holdings was based on values received from the portfolio managers of those underlying funds. But that, in fact, he actually valued the fund’s largest investment at a significant markup to the manager’s estimated value, it says.
Additionally, it says that he disseminated marketing materials reporting an internal rate of return that failed to deduct fees and expenses, which “significantly enhanced” its apparent performance.
The allegations have not been proven. Earlier this year, Oppenheimer agreed to pay US$2.8 million in a settlement of related charges with the SEC.
“Investors deserve and the law requires honest disclosure about how their investments are valued,” said Andrew Ceresney, co-director of the SEC’s Division of Enforcement. “Williamson improperly lured investors to the private equity fund he managed by providing false and misleading information about the fund’s performance.”
“Interim valuations are especially important when used to raise funds in the private equity industry,” said Julie Riewe, co-chief of the SEC Division of Enforcement’s asset management unit. “Private fund managers must provide investors with accurate disclosures about valuation methodologies as well as fund fees and expenses so they can make fully informed investment choices.”