U.S. SEC orders UK's BlueCrest to pay $170 million to harmed investors

WASHINGTON (Reuters) - The U.S. securities regulator said on Tuesday that UK-based investment advisor BlueCrest Capital Management Ltd had agreed to pay $170 million to settle charges that it allegedly misled investors over the existence of a proprietary hedge fund created to invest staff capital.

The Securities and Exchange Commission (SEC) alleged that in 2011 BlueCrest created the hedge fund to invest staff capital, to which it transferred top-performing traders from its flagship client fund. The company replaced those traders in the client fund with an algorithm which “generally underperformed” the traders, the SEC alleged.

BlueCrest failed to adequately disclose, and made misstatements and omitted facts concerning, the proprietary fund’s existence, the movement of traders, and related conflicts of interest, the SEC alleged. The $170 million will be distributed to investors, the agency said.

BlueCrest neither admitted nor denied the SEC allegations, other than conceding that the SEC has jurisdiction which is typically the case when funds have U.S. investors.

In a statement, BlueCrest said that in cooperating with the SEC, it had “resolved this matter which primarily involved disclosures that were made more than five years ago ... and does not relate in any way to our current business operations.”

It added that it had not managed outside client assets since 2015.

“BlueCrest repeatedly failed to act in the best interests of its investors,” said Stephanie Avakian, the head of the SEC’s Division of Enforcement. “This settlement holds BlueCrest responsible for its conduct and furthers the SEC’s goal of returning funds to harmed investors.”

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Reporting by Lisa Lambert and Katanga Johnson; Editing by Chizu Nomiyama and Michelle Price