NEW YORK (Legal Newsline) - The Securities and Exchange Commission on Wednesday sued a Malaysian investment adviser, alleging it billed a U.S. registered fund for advisory services that it did not provide.
This allegedly breached its fiduciary duty with respect to compensation under the Investment Company Act of 1940.
Kuala Lumpur-based AMMB Consultant SendirianBerhad, sub-adviser to the Malaysia Fund, Inc., is a closed-end fund that invests in Malaysian companies. The principal investment adviser is Morgan Stanley Investment Management.
The SEC alleges that AMC misrepresented its services during the fund's annual advisory agreement review process for each year for more than 10 years, and AMC collected fees for advisory services that it did not provide.
According to the SEC, AMC submitted a report to the Malaysia Fund's board of directors each year that falsely claimed that AMC was providing specific advice, research, and assistance to MSIM for the benefit of the fund.
AMC's advisory fees were approved each year from 1996-2007.
But the SEC's complaint said that AMC's services were limited to providing two monthly reports based on publicly available information that MSIM did not request or use. Moreover, the SEC alleged that AMC failed to adopt and implement adequate policies, procedures and controls over its advisory business, contrary to certifications provided to the fund's directors in 2006 and 2007.
AMC's advisory agreement with the fund was terminated in early 2008 after the SEC's examination staff inquired about the services AMC was purportedly providing to the fund.
AMC consented to a judgment that bars it from violating these provisions in the future. AMC has also agreed to disgorge $1.3 million of its advisory fees paid by the fund and pay a $250,000 penalty.