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SEC Charges Money Manager for Misleading Advertisements

The SEC recently charged Mark Grimaldi, a money manager, and Navigator Money Management (NMM), for making false claims in advertisements regarding the success of NMM’s advice and the Sector Rotation Fund, a mutual fund managed by the NMM.  The SEC order finds that Grimaldi and NMM cherry picked investment results when soliciting clients in newsletter and other communications.  For example, a newsletter claimed that Sector Rotation Fund outperformed all other world allocation funds tracked by Morningstar.  While the claim was true for the period of October 13, 2010 through October 12, 2011, it was not true for other time periods.  In fact, from January 1 through November 30, 2011 (the day before the ad was published), the fund was outperformed by at least 100 funds in its Morningstar category.  In addition, newsletters and other communications with potential investors asserted that the firm was a “five-star (Morningstar) money manager.”  However, Morningstar does not provide star ratings to money managers, and further, the firm had not advised funds ranked five stars by Morningstar.  Grimaldi and NMM agreed to settle the charges.