ADMINISTRATIVE PROCEEDING
File No. 3 - 21711
 

September 25, 2023 – The Securities and Exchange Commission today announced that Wellesley Asset Management, Inc. (“WAM”), a Massachusetts-based registered investment adviser, has agreed to settle charges that it made misleading statements of material fact in performance advertisements and that it failed to design and implement compliance policies and procedures for performance advertising.

According to the SEC’s order, from February 2015 to March 2022, WAM’s written disclosures for advertisements concerning an index that WAM created to depict the performance of its convertible bond investment strategy from January 2000 forward failed to fully and fairly disclose the methodologies that WAM used to construct the index. Among other things, the order finds that WAM at times failed to adequately disclose that the index included hypothetical performance.  The order also finds that WAM presented the index’s performance during at least three client webinars and misstated that the index represented composite returns from its convertible bond strategy.

The SEC’s order finds that WAM willfully violated the antifraud provisions of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 (“Advisers Act”) and Rule 206(4)-1(a)(5) thereunder and the policies and procedures provisions of Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder. Without admitting or denying the findings, WAM consented to a cease-and-desist order and censure, and agreed to pay a civil penalty of $1 million.

The SEC’s investigation was conducted by Dahlia Rin, Michael Moran, and Rory Alex of the Boston Regional Office, with the assistance of Stuart Jackson of the Division of Economic and Risk Analysis.  The investigation was supervised by Robert Baker of the Boston Regional Office and Andrew Dean and Corey Schuster of the Asset Management Unit.  The examination that led to this investigation was conducted by Michael McGrath, Philip St. Pierre, and Lily Chan-Sann.