Settling charges that it had used false performance claims regarding an ETF-linked strategy, Virtus Investment Advisers agreed to pay the SEC $16.5 million in penalties.

Authorities stated that Hartford, Conn.-based Virtus "substantially overstated the performance track record," of the AlphaSector strategy from F-Squared, which it hired as a subadvisor for mutual funds.

Last year, F-Squared admitted to passing off a hypothetical track record of its ETFs as real. It was fined $35 million by the SEC and later went bankrupt.

“Virtus accepted F-Squared’s historical performance misrepresentations at face value and ignored red flags that called these statements into question,” said Andrew J. Ceresney, Director of the SEC enforcement division. “If an investment advisor chooses to advertise, it is responsible for the content and accuracy of its ads.”

The fund manager neither admitted nor denied any of the SEC's findings.

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