Four Transamerica affiliates have agreed to a $97.6m settlement with the US Securities and Exchange Commission (SEC) over allegations that it provided faulty investment models to retail investors.
The settlement resolves charges against AEGON USA Investment Management (AUIM), Transamerica Asset Management (TAM), Transamerica Financial Advisors, and Transamerica Capital.
SEC alleged that investors put billions of dollars into mutual funds and strategies leveraging models that failed to work as intended. The models were said to be developed by a junior analyst at AUIM.
The regulator also accused AUIM and TAM of ceasing the use of the models without revealing the errors to investors.
SEC enforcement division asset management unit co-chief C. Dabney O’Riordan said: “Investors were repeatedly misled about the quantitative models being used to manage their investments, which subjected them to significant hidden risks and deprived them of the ability to make informed investment decisions.”
The settlement amount, which will be reimbursed to affected investors, includes around $53.3m in disgorgement, $8m in interest, and a penalty of $36.3m.
Transamerica has agreed to the settlement without admitting or denying the charges.
At the same time, the SEC also charged AUIM former global CIO Bradley Beman and its former director of new initiatives Kevin Giles of certain violations at the company.
The regulator said that Beman failed to take effective measures to ensure the proper working of the mutual funds’ models.
Both Beman and Giles were also said to contribute to compliance failures in connection with the development and use of the models.
Beman has been fined $65,000 in the case, while Giles has been fined $25,000. The amount will be refunded to affected investors.
The pair agreed to pay the penalty without admitting or refuting misconduct.