Fund Adviser AMMB Consultant Sendirian Berhad Agrees to Pay More than $1.5 million to settle SEC Charges

Securities and Exchange Commission v. AMMB Consultant Sendirian Berhad, Case No. 1:12-cv-01052 (D.D.C.).  On June 26, 2012, the SEC sued AMMB Consultant Sendirian Berhad (“AMC”), a Malaysian investment adviser, for charging a U.S. registered fund for over a decade for advisory services that AMC did not provide.  The Fund, a closed-end investment company registered with the SEC, was AMC’s only client.  Each year between 1996 and 2007, AMC misrepresented to the Fund’s board of directors that AMC was providing certain services it, in fact, was not providing.  Based on AMC’s misrepresentations each year, the board renewed AMC’s contract and approved its advisory fees.  In addition, AMC had a Research and Advisory Agreement with the Fund and the Fund’s primary investment adviser, Morgan Stanley Investment Management, Inc. (“MSIM”), to serve as the Fund’s sub-adviser in Malaysia and provide investment advisory services for the benefit of the Fund.  AMC provided reports to MSIM for submission to the Fund’s board that falsely claimed AMC was providing specific research, intelligence, and advice to MSIM.  In reality, AMC’s advisory services were limited to preparing two minor reports a month that contained only publicly available information and that MSIM’s portfolio management team neither requested nor used during the relevant time period.  Finally, AMC failed to adopt and implement policies and procedures reasonably designed to prevent misrepresentations to its client regarding the research and advisory services it was providing.  AMC certified to the Fund that it had adopted and implemented policies, procedures, and controls reasonably designed to prevent violations of the laws, rules, or regulations applicable to its advisory business.  In fact, AMC had not adopted or implemented any such policies and procedures.

Without admitting or denying the allegations of the complaint, AMC consented to entry of an order enjoining it from future violations of Sections 206(2) and (4) of the Investment Advisers Act and Rule 206(4)-7 thereunder, and Section 15(c) of the Investment Company Act.  AMC also agreed to pay $1.3 million in disgorgement and a $250,000 civil monetary penalty.

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