The SEC settled charges with two investment advisers to a closed-end fund based on allegations that the advisers failed to adequately disclose a change in investment strategy to the fund’s board and its investors. The SEC also found that shareholder reports filed with the SEC were inaccurate.

According to the SEC, the fund originally invested in distressed debt, but, in 2008, it began investing a significant portion of the fund’s assets in credit default swaps (CDS). Prior to 2008, the market value of the CDS portfolio never exceeded 2.6% of the fund’s net assets. The SEC found that by the end of the first quarter of 2009, however, the fund’s CDS portfolio grew to 25% of net assets.