An SEC judge this week banned a Florida money manager from the securities industry and required him and his firm to pay a fine totaling $660,000 for “misleading” research firm Morningstar and the general public in advertisements.
The administrative law judge found that Max E. Zavanelli — a portfolio manager at ZPR Investment Management who has compared his success at investing to the legendary Fidelity Investments manager Peter Lynch — misrepresented and omitted important data in newspaper advertisements, its own newsletters and reports for Morningstar.
The Orange City, Fla., firm’s filings with securities regulators list more than $200 million in assets under management from 119 clients, including pension funds, high-net-worth individuals and charitable organizations.
Some of the firm’s performance data falsely implied compliance with the Global Investment Performance Standards, a widely used standard backed by the CFA Institute, the Securities and Exchange Commission said.
“It is in the commission’s interest to deter others from behaving like Max Zavanelli,” wrote the judge, Cameron Elliot, in his opinion dated Tuesday. “In addition to intentionally misleading clients and prospective clients, he refused to accept responsibility for the abdication of his fiduciary duty to his clients.”
“If a firm says they’re GIPS compliant and they fail to adhere to any GIPS requirement, including the advisory guidelines, that person or firm can be barred from the industry and suffer substantial penalties, and it’s something that’s going to have a chilling effect on people saying their GIPS complaint,” said Philip J. Snyderburn, a lawyer representing Mr. Zavanelli. “It’s the equivalent of rolling through a stop sign and you’ve been given the death penalty.”
Mr. Zavanelli will appeal the decision, Mr. Snyderburn said.
Mr. Zavanelli was previously found, in 1987, to have violated the law for misleading claims about investment performance and his educational background, according to the SEC. He settled the charges without admitting guilt.
But in the latest ruling, the judge also conceded a point to Mr. Zavanelli, saying the SEC hadn’t presented evidence that the firm’s actions “actually harmed investors.”
Margaret Kirch Cohen, a Morningstar spokeswoman, did not respond to a request for comment.