Transamerica's Entities to Pay $97.6 Million to Misled Retail Investors--Update

By Kimberly Chin

Transamerica Corp. has agreed to pay $97.6 million following a settlement with the U.S. Securities and Exchange Commission over charges that four of its entities misled retail investors.

The SEC said Monday that Aegon USA Investment Management LLC, along with Transamerica Asset Management Inc.,Transamerica Financial Advisors Inc. and Transamerica Capital Inc., claimed that investment decisions would be based on Aegon's quantitative models.

The models, however, were developed solely by an inexperienced junior analyst, contained numerous errors, and didn't work as promised, the SEC said. When the entities found out about the errors, they stopped using the models without telling their investors, who had put billions of dollars into mutual funds and other strategies using the models.

The four Transamerica entities didn't admit or deny the SEC's charges. They agreed to pay about $53.3 million in disgorgement, $8 million in interest and a $36.3 million penalty. The entities also agreed to create and administer a fund to distribute the entire $97.6 million to affected investors.

In an email, a spokesman for Aegon NV, the Dutch parent company of Transamerica, said the company cooperated fully with SEC throughout the investigation and is "pleased to put the matter behind us."

"While the models at issue are no longer in use, we recognize we must do better, and we have taken steps to enhance our policies, procedures and disclosure processes," the spokesman said. "We remain confident in our investment process and are committed to continuously improving our business."

In two separate orders, the SEC also found that Bradley Beman, Aegon's former global chief investment officer, and Kevin Giles, its former director of new initiatives, each "were a cause" for the violations at the investment firm.

The agency said Mr. Beman "did not take reasonable steps to make sure the mutual funds' models worked as intended," and that both contributed to Aegon's "compliance failings related to the development and use of models."

Mr. Beman and Mr. Giles didn't admit wrongdoing. They agreed to settle with the agency to return, as a penalty, $65,000 and $25,000 respectively to investors.

A counsel for Mr. Beman wasn't immediately available for comment. Mr. Giles's counsel said he had no further comment.

A spokesman from the law firm representing Mr. Beman noted in an email that the faulty models were used in a small subset of U.S. strategies at a time when Mr. Beman was responsible for multiple strategies and portfolio teams globally. The analyst who created them didn't report to Mr. Beman.

"There was no intent and no personal benefit to Mr. Beman," the spokesman added.

Write to Kimberly Chin at kimberly.chin@wsj.com

(END) Dow Jones Newswires

August 27, 2018 14:41 ET (18:41 GMT)

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