The SEC has fined Virtus Investment Advisers, a subsidiary of publicly traded Virtus Investment Partners (VRTS), $16.5 million for advertising false performance data about the AlphaSector ETF portfolio strategy.
The AlphaSector strategy was managed by F-Squared, a subadvisor for Virtus that itself was fined $35 million late last year for misleading performance advertising and which filed for bankruptcy in July.
The SEC said that during the time that Virtus used the false and misleading ads, its Alpha Sector fund assets grew from $191 million at year-end 2009 to $11.56 billion by 2013.
“Virtus accepted F-Squared’s historical performance misrepresentations at face value and ignored red flags that called these statements into question,” said Andrew Ceresney, director of the SEC Enforcement Division, in a statement.
According to the SEC’s previous charges, F-Squared and its CEO, Howard Present, advertised a seven-year track record, from April 2001 to September 2008, that they said were based on the actual performance of client assets and not a backtest, The opposite was true, according to the SEC.