Professor Elam

Tuesday August 28, 2018

Tansamerica settled for misleading investor paying a $36.3 M civil fine and returning $61.3 M to investors.

I caught this on page B 3 of today's WSJ, did you?

Transamerica is owned by Dutch Aegon.  Investors in mutal funds, variable life, annuities and such were told decisions would be made based on Aegon's quantitative models.

Instead

The defendants did not admit or deny wrongdoing. Aegon has said it managed $982 billion of revenue-generating investments in 2017.

According to the SEC, the quantitative models had been developed by a junior analyst with no experience in portfolio management or formal training in financial modeling.

It said employees knew in advance of errors by the analyst, citing internal emails that said "we take the hit if he screws it up."

Do you suppose anyone lost his or her job over this?  And I don't mean the jr analyst, I mean the ones who knew, and deliberately misled investors.

I doubt it.  This is what good governance is all about. We study many such cases in ACCT 5308 Ethics. And again and again, a firm is caught in an  ethical violation, admits nothing, pays a few million, and goes on down the road as though nothing happened.

Is this what should happen or should executives be held personally accountable?

See our next post about governance at Tesla TSLA.