Four Transamerica entities will pay $97.6 million to settle U.S. Securities and Exchange Commission charges that they sold investments that were supposedly based on quantitative models but which did not work as intended, the regulator said on Aug. 27.
The settlement with the units of Netherlands-based Aegon NV includes a $36.3 million civil fine plus $61.3 million of disgorged sums and interest, all of which will be returned to investors.
It resolves claims against Aegon USA Investment Management LLC, Transamerica Asset Management Inc., Transamerica Capital Inc., and Transamerica Financial Advisors Inc over 15 mutual funds, variable life investments, variable annuities and separately managed account strategies sold from July 2011 to June 2015.
The defendants did not admit or deny wrongdoing. Aegon has said it managed $982 billion of revenue-generating investments in 2017.
According to the SEC, the quantitative models had been developed by a junior analyst with no experience in portfolio management or formal training in financial modeling.
It said employees knew in advance of errors by the analyst, citing internal emails that said: “we take the hit if he screws it up.”
The SEC said Transamerica stopped using the models upon finding numerous errors but failed to tell investors.
Transamerica’s conduct subjected investors to “significant hidden risks and deprived them of the ability to make informed investment decisions,” said C. Dabney O’Riordan, co-chief of the SEC enforcement division’s asset management unit.
Aegon spokesman Dick Schiethart said in a phone interview that the company reported the errors to the SEC and cooperated fully. The company set aside $100 million in the fourth quarter of 2017 for a settlement.
Bradley Beman, Aegon USA Investment Management’s former global chief investment officer, and Kevin Giles, its former director of new initiatives, were fined a respective $65,000 and $25,000 to settle related charges.
Beman’s lawyer did not immediately respond to requests for comment. Giles’ lawyer Thomas Newkirk declined to comment.
By Jonathan Stempel