The Securities and Exchange Commission last week barred an Arizona-based mutual fund manager from the securities industry for failing to follow his own prospectus, which led to his fund’s collapse.
According to the SEC, the prospectus of the Z Seven Fund (ZSF) stated that it sought long-term capital appreciation and restricted the use of options. However, beginning in September 2009, Barry Ziskin and his firm Top Fund Management invested ZSF in put options on a larger scale and, as a result, suffered huge losses. Massive investor redemptions ultimately resulted in ZSF’s liquidation in December 2010.
“ZSF investors expected the fund to pursue capital appreciation by buying stocks, but TFM and Ziskin took the fund down a very different and disastrous path,” stated Bruce Karpati, Chief of the SEC Enforcement Division’s Asset Management Unit.
“Mutual fund advisers who deviate from their fund’s investment strategy and keep investors in the dark will be held accountable for their fraudulent actions.”