AXA Rosenberg settles with SEC for $65 million

Despite settlement and previous lifetime securities industry ban, Rosenberg admits no wrongdoing

Barr Rosenberg, co-founder of AXA Rosenberg Group LLC, agreed to settle with the U.S. Securities and Exchange Commission (SEC) yesterday over allegations of securities fraud for concealing a coding error in his firm’s investment model.  

AXA Rosenberg programmers inadvertently introduced a coding error in January 2007 that exposed clients to excess risk and caused losses that otherwise may not have occurred. The error eventually was detected in June 2009, but Rosenberg instructed his employees to cover up the mistake and stalled repairs.

The company finally notified its clients in April 2010, but not before the SEC began investigating the situation. In September, the SEC levied a lifetime securities industry ban against Rosenberg for his actions, and fined him $2.5 million.

The attorneys for the four pension funds leading the investor lawsuit against Rosenberg explained the $65 million settlement as a “substantial recovery” above the amount the SEC obtained.

Earlier this year, AXA Rosenberg’s parent, Paris-based AXA SA, agreed to pay $217 million to cover client losses, and a $25 million fine to settle the SEC’s civil fraud charges.

AXA Rosenberg’s settlement is still pending court approval, which is scheduled for Feb. 17, 2012. 

Danielle Feinstein

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