NEW YORK (Legal Newsline) - Settlements between two former Bear Stearns portfolio managers and the Securities and Exchange Commission were approved June 18 by the U.S. District Court for the Eastern District of New York.
Ralph R. Cioffi and Matthew M. Tannin, who co-managed the Bear Stearns High-Grade Structured Credit Strategies Fund and Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Fund, were ordered to pay a total of $1.05 million in disgorgement and civil penalties.
The SEC also issued orders instituting administrative proceedings that bar Cioffi and Tannin from regulated industries for three years and two years, respectively.
According to the SEC's complaint, filed June 19, 2008, the Bear Stearns funds collapsed in June 2007 after taking highly leveraged positions in structured securities based largely on subprime mortgage-backed securities. Cioffi was the senior portfolio manager, and Tannin was a portfolio manager and the chief operating officer for the funds.
They allegedly misrepresented the extent to which the funds had invested in securities backed by subprime mortgages and, during an April 2007 investor conference call, Cioffi misrepresented the level of investor redemption requests.
The complaint also alleged that Cioffi did not tell investors about his own April 2007 redemption of a portion of his personal investment in the Enhanced Leverage Fund used to invest in a third fund for which he acted as portfolio manager.
The complaint further alleged that Tannin misrepresented that he was going to add to his personal investment in the Enhanced Leverage Fund and that he misrepresented the funds' prospects during the April 2007 investor call.
Cioffi and Tannin settled the SEC's charges without admitting or denying the allegations in the complaint and consented to the entry of district court judgments. The court also ordered Cioffi to pay $700,000 in disgorgement and a $100,000 civil penalty, and ordered Tannin to pay $200,000 in disgorgement and a $50,000 civil penalty.
They further consented to the issuance of the Commission orders, which bar them from associating with any investment adviser, broker-dealer, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, for three years as to Cioffi and two years as to Tannin.