F-Squared haunts Virtus as fund distributor pays $16.5M to settle false performance claims

Virtus Investment Advisers agreed to pay a $16.5 million fine to settle charges it publicized false performance data for the AlphaSector exchange-traded fund, the Securities and Exchange Commission reported Monday. According an SEC statement, Virtus published a “substantially overstated performance record as received from F-Squared, which was hired as a subadviser.” F-Squared Investments, which filed bankruptcy in July, agreed to a $35 million settlement with the SEC in December to settle charges it defrauded investors through false performance advertising. “Virtus accepted F-Squared's historical performance misrepresentations at face value and ignored red flags that called these statements into question,” said Andrew J. Ceresney, director of the SEC Enforcement Division in a statement. “If an investment adviser chooses to advertise, it is responsible for the content and accuracy of its ads.” Virtus did not respond to a request for comment. In September 2014, the SEC probe href="http://blogs.wsj.com/moneybeat/2014/09/05/virtus-shares-take-a-pounding-on-f-squared-sec-probe/" target="_blank">pushed shares of Virtus Investment Partners (VRTS) down 12% and 7.7% on consecutive trading days. In mid-day trading on Monday, the stock was up more than 3%.