UPDATE 2-Oppenheimer to pay $2.8 mln to settle valuation case

Mon Mar 11, 2013 6:00pm EDT

March 11 (Reuters) - Oppenheimer & Co will pay more than $2.8 million to settle charges that it misled investors about the performance and policies of a private equity fund, the U.S. Securities and Exchange Commission and Massachusetts regulators said on Monday.

Oppenheimer's valuation of the largest investment of the fund, the Oppenheimer Global Resource Private Equity Fund, raised the internal rate of return from 3.8 percent to 38.3 percent, the regulators said in statements.

Oppenheimer also told investors certain information was vetted and audited by independent third parties, which was not the case, according to officials.

The fund was sold mainly to state entities, endowments and high net-worth individuals.

Oppenheimer settled with authorities without admitting or denying the allegations. It consented to a censure, the SEC said.

Fund investors included pension funds of the cities of Brockton and Quincy in Massachusetts, the state's attorney general, Martha Coakley, said in a statement.

Officials said that Oppenheimer Asset Management and Oppenheimer Alternative Investment Management sent out misleading quarterly reports and marketing material that claimed the fund's holdings of other private equity funds were valued "based on the underlying managers' estimated values."

But the portfolio manager of the fund had set the value of the fund's biggest investment at a significant markup from the underlying managers' estimated value, officials said.

Oppenheimer is required by the settlement to hire an independent compliance consultant, officials said. The firm will pay a $617,579 penalty and return $2,269,098 to investors, the SEC said.

A spokesman for Oppenheimer said in a statement that Oppenheimer Asset Management cooperated fully with regulators and is "pleased to put the matter behind us."

"Oppenheimer Asset Management believes it has put in place additional policies and procedures designed to ensure that valuations of portfolio positions in its marketing documents are determined in a manner consistent with its obligations to investors."

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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