SEC Fines, Ousts Advisor From Industry for Defrauding CalPERS, Others - UPDATED

The Securities and Exchange Commission on Thursday charged the chief executive officer of a Chicago-based advisory firm with lying to the California Public Employees’ Retirement System and other clients about the amount of money managed by the firm.

Simran Capital Management CEO Umesh Tandon, 37, deceived CalPERS by falsely claiming that his firm met minimum assets under management standards, according to the SEC. Institutional investors like CalPERS often use AUM as a metric to screen prospective investment advisers soliciting their business.

The SEC further alleged that Tandon similarly inflated his firm’s AUM in dealings with other potential clients, while touting his business with CalPERS, and that he fraudulently reported an inflated AUM in filings with the SEC.

The SEC’s settlement with Tandon states that he told CalPERS in May 2008 that Simran managed at least $200 million as of Dec. 31, 2007.  In fact, Simran managed approximately $80 million at that time. The SEC said evidence indicates that Tandon was aware that Simran did not meet the $200 million of AUM that CalPERS required for a prospective investment advisor.

Tandon later overstated the firm’s business again, the SEC said, when he told CalPERS in Sept. 2009 that Simran managed $325 million. In fact, the firm managed only about $79 million at that time. Simran ultimately managed as much as $122 million for CalPERS, but the relationship ended in April 2010.

After landing the CalPERS business, the SEC said Tandon told other Simran employees to tout the firm’s relationship with CalPERS as well as engage in fraudulent activity with other clients. A January 2010 email from Tandon to two employees that was obtained by SEC investigators stated the employees should “not pay too much attention to minimum asset requirements nor length of performance record” requirements.

“CalPERS had similar requirements but we applied anyway,” Tandon wrote in the email.

A June 2010 email encouraged Simran employees to respond to a request for proposals from another potential client because “CalPERS had a lot more criteria which we did not fit.”

Tandon inflated the firm’s AUM to at least 14 potential or current clients, the SEC alleged. He later attempted to mislead SEC examiners during a routine examination of Simran, the commission said.

Barbara Mallon, with Mallon & Johnson, which is representing Tandon, could not be reached for comment.

“Tandon deliberately undermined the CalPERS screening process by grossly misrepresenting his firm’s purported assets under management,” said Merri Jo Gillette, director of the SEC’s Chicago office.  “To make matters worse, he then used his association with CalPERS to lure other public institutional investors under false pretenses.”

Tandon, who previously lived in Chicago and now resides in Texas, agreed to settle the SEC’s fraud charges that he violated several sections of the Investment Advisers Act of 1940. In February 2012, Simran withdrew its SEC registration as an investment adviser and has since liquidated its assets and closed its doors.

Tandon neither admitted nor denied the findings, but agreed to be barred from the securities industry and disgorge ill-gotten gains of $20,018, prejudgment interest of $1,680, and a penalty of $100,000.

Peter K.M. Chan investigated for the SEC, along with Jonathan I. Katz and Andrew O’Brien in the Chicago office.  They were assisted by members of the Chicago office’s examination staff including Susan M. Weis, Jeson G. Patel, and Max J. Gillman.




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