Umesh Tandon, president, chief compliance officer, and sole owner of Simran Capital Management, recently agreed to a settlement with the SEC relating to alleged violations of the Investment Advisers Act of 1940 and the Investment Company Act of 1940 stemming from false representations of the amount of Simran’s assets under management (AUM), a common metric used when analyzing investment advisers.  Tandon’s lies about Simran’s AUM were particularly blatant; at times, the company represented in responses to RFPs that it had AUM vastly in excess of the figures it was concurrently publicly reporting on its Form ADV.  

According to the SEC’s order, the fraud began with a response to a 2008 RFP from the California Public Employers’ Retirement System (CalPERS).  CalPERS required, among other things, that any investment adviser submitting a response to the RFP have AUM of at least $200 million.  At the time, Simran had only $80 million in AUM, but it nevertheless submitted a proposal certifying that it met the $200 million AUM threshold and ultimately won the bid over competitors who were eliminated by CalPERS for failure to meet the AUM requirement.

Over the next several years Simran managed up to $122 million for CalPERS while continuing to lie about Simran’s AUM to CalPERS and others – the largest discrepancy was in July 2010, when Simran claimed on its Form ADV that it had $375 million in AUM but actually had only $25 million in AUM.

Mr. Tandon touted the hiring of Simran by CalPERS and inflated its AUM significantly in multiple proposals to other institutional investors – including other public pension funds.  In internal e-mails, Tandon instructed his employees not to pay much attention to AUM requirements, since CalPERS had multiple requirements that Simran had not met (including the AUM requirement) but had hired Simran anyway.

Pursuant to the settlement, Mr. Tandon is barred from participating in the securities industry and is required to pay about $120,000 in penalties and disgorgement of profits.

Check dodd-frank.com frequently for updated information on the Dodd-Frank Act, the JOBS Act, and other important securities law matters.

Topics:  Asset Management, Investment Advisers Act of 1940, Investment Company Act of 1940, Misrepresentation, SEC, Settlement

Published In: Business Organization Updates, Business Torts Updates, Civil Remedies Updates, Finance & Banking Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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