Virtus Investment Partners disclosed that it was able to reach a tentative agreement with the Securities and Exchange Commission (SEC) to settle an investigation whether it was involved and violated any securities laws related to the F-Squared Investments performance rigging scandal.
In its earnings release on Friday, Virtus Investment Partners wrote, In October, the company reached an agreement in principle with the staff of the Securities and Exchange Commission to settle the matter. The agreement in principle is subject to review and approval by the Commission.”
Virtus Investment Partners CEO George Aylward repeated the same statement during a conference call with analysts. According to him, he cannot provide additional details regarding the agreement/settlement because it is still subject to review and approval by the SEC.
For the first quarter of 2022, the Voss Value Fund returned -5.5% net of fees and expenses compared to a -7.5% total return for the Russell 2000 and a -4.6% total return for the S&P 500. According to a copy of the firm’s first-quarter letter to investors, a copy of which ValueWalk has been able Read More
F-Squared served a subadviser for Virtus Investment
F-Squared Investments was the largest marketer of index products using exchange-traded funds (ETFs), and it served as a subadviser for Virtus Investment Partners on five mutual funds.
The SEC launched an investigation and eventually filed charges against F-Squared Investments for allegedly committing fraud by making false performance claims to investors. F-Squared Investments admitted its wrongdoing and agreed to pay a fine of $35 million to settle the case. In July, the firm filed for Chapter 11 bankruptcy protection.
SEC will likely approve the settlement
Virtus Investment Partners allocated $16.5 million to settle the regulatory issue with the SEC. Jefferies analyst Surinder Thind commented that the announcement was positive, and the reserved amount is sufficient at this time.
“VRTS has reached a settlement with the staff of the SEC regarding the investigation into its marketing of the former AlphaSector funds. In order for the agreement to be finalized, it needs to be formally approved by the SEC Commission,” according the analyst.
Mr. Thind believed that the SEC will likely approve the settlement by the end of the year, which “removes some of the overhangs on the stock.”
On the other hand, Michael Kim, an analyst at Sandler O’Neill upgraded his rating for the shares of Virtus Investment Partners from Sell to Hold citing the reason that the regulatory problem is “fading.”
In a note to investors, Mr. Kim said, “While further details of the proposed settlement remain undisclosed, the total financial consideration seems likely to be consistent with the prior $16.5 million loss contingency. Separately, an ongoing class-action suit likely continues to play out in the courts over an extended period, with little visibility into any potential operational/financial impact to VRTS.”
Virtus Investment Partners earnings/ stock performance
The shares of Virtus Investment Partners are trading $126.62 per share, up by nearly 3% at the time of this writing around 12:28 in the afternoon in New York. The company gained more than 20% in stock value over the past five days.
Over the past 52 weeks, Virtus Investment Partners traded its stock between $94.52 and $188.04 per share. The company still lost more than 29% of stock value over the past year.
Virtus Investment Partners posted adjusted earnings of $1.74 per share for the third quarter compared with a loss of -$0.07 per share in the same period a year ago. The company delivered total sales of $2.5 billion, lower than the $3.5 billion recorded last year. It has $47.9 billion assets under management (AUM) as of September 30, 2015.