The US Securities and Exchange Commission (SEC) has fined investment advisor, Oz Management LP, $4.25 million after charging the company with providing inaccurate trade data to its four prime brokers, which later flowed into SEC investigation data, according to an announcement by the regulator today (14 July).
A subsidiary of Och-Ziff Capital Management Group, the firm admitted to wrongdoing spanning an almost six-year period. The charges relate to the intentional misidentification of trade data provided to its four prime brokers, which consequently led to inaccuracies to the tune of approximately 552 million shares in the brokers’ books and records.
Indeed, the inaccuracies meant that the brokers violated federal securities laws and SEC rules requiring accurate books and records.
OZ Management’s inaccurate data had a substantial ripple effect that the SEC staff discovered through diligent investigative work.
Furthermore, via “blue sheet” requests issued by the SEC, the brokers’ broken data was incorporated into various SEC records and data. “Blue sheets” are issued by the regulator to seek information related to specific transactions in order to determine wrongdoing following unusually volatile market behaviour. As a result of the false information received by the SEC during its investigations, approximately 14.4 million shares were inaccurately reported.
In terms of the actual misleading data, SEC reported that “the discrepancy arose for trades where OZ Management did not characterize sales as long or short based on how they were marked when they were sent to the market but filtered them based on other factors, such as the relevant fund’s position in the stock at the Prime Broker .”
“The SEC relies on the accuracy of the books and records of financial institutions and blue sheet data,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement. “OZ Management’s inaccurate data had a substantial ripple effect that the SEC staff discovered through diligent investigative work.”
