The Securities and Exchange Commission charged Harvest Volatility Management and Merrill Lynch on Wednesday for exceeding clients' predesignated investment limits over a two-year period.The SEC found Harvest exposed investors to greater financial risks and Merrill connected clients to Harvest while aware that accounts were exceeding designated limits.
The Securities and Exchange Commission charged Harvest Volatility Management and Merrill Lynch on Wednesday for exceeding clients' predesignated investment limits over a two-year period.Harvest was the primary investment adviser and portfolio manager for the Collateral Yield Enhancement Strategy, which traded options in a volatility index aimed at incremental returns.
Both Merrill and Harvest received larger management fees while investors were exposed to greater financial risks, the SEC said. Both companies were found to neglect policies and procedures that could have been adopted to alert investors of exposure exceeding the designated limits. "In this case, two investment advisers allegedly sold a complex options trading strategy to their clients, but failed to abide by basic client instructions or implement and adhere to appropriate policies and procedures," said Mark Cave, associate director of the SEC's enforcement division.