In re MACQUARIE INVESTMENT

 
UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
INVESTMENT ADVISERS ACT OF 1940 
Release No. 6709 / September 19, 2024 
 
INVESTMENT COMPANY ACT OF 1940 
Release No. 35325 / September 19, 2024 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-22144 
 
 
In the Matter of 
 
MACQUARIE INVESTMENT 
MANAGEMENT BUSINESS 
TRUST,  
 
Respondent. 
 
 
 
 
 
 
ORDER INSTITUTING ADMINISTRATIVE 
AND CEASE-AND-DESIST PROCEEDINGS, 
PURSUANT TO SECTIONS 203(e) AND 
203(k) OF THE INVESTMENT ADVISERS 
ACT OF 1940, AND SECTIONS 9(b) AND 
9(f) OF THE INVESTMENT COMPANY 
ACT OF 1940, MAKING FINDINGS, AND 
IMPOSING REMEDIAL SANCTIONS AND 
A CEASE-AND-DESIST ORDER 
 
 
 
I. 
 
The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 
public interest that public administrative and cease-and-desist proceedings be, and hereby are, 
instituted pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 
(“Advisers Act”), and Sections 9(b) and 9(f) of the Investment Company Act of 1940 
(“Investment Company Act”) against Macquarie Investment Management Business Trust 
(“MIMBT” or “Respondent”).    
 
II. 
 
In anticipation of the institution of these proceedings, MIMBT has submitted an Offer of 
Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the purpose 
of these proceedings and any other proceedings brought by or on behalf of the Commission, or to 
which the Commission is a party, and without admitting or denying the findings herein, except as 
to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are 
admitted, Respondent consents to the entry of this Order Instituting Administrative and Cease-and-
Desist Proceedings Pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 

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1940, and Sections 9(b) and 9(f) of the Investment Company Act of 1940, Making Findings, and 
Imposing Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below.  
 
III. 
 
On the basis of this Order and Respondent’s Offer, the Commission finds
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 that: 
Summary  
1. These proceedings involve MIMBT’s Absolute Return Mortgage-Backed Securities 
strategy (the “Strategy”), a fixed income investment strategy primarily invested in U.S. agency 
mortgage-backed securities (“MBS”), treasury futures, and agency collateralized mortgage 
obligations (“CMOs”).  From January 2017 through April 2021 (the “Relevant Period”), MIMBT 
served as the adviser or sub-adviser to twenty advisory clients with exposure to some or all of the 
Strategy’s investments, including eleven U.S.-registered investment companies, each a retail 
mutual fund (“RICs”), and nine unregistered investment vehicles (the “Unregistered Investment 
Vehicles”), including four private investment funds, each a pooled investment vehicle as defined in 
Rule 206(4)-8 under the Advisers Act (“Unregistered Pooled Investment Vehicle”) (collectively, 
the “Strategy Accounts”).    
 
2. During the Relevant Period, MIMBT was responsible for pricing all Strategy-related 
investments and used those prices for its daily client performance reporting.  MIMBT engaged an 
independent third-party pricing service (“Pricing Vendor”) to provide evaluated marks for all 
Strategy-related securities.  The Pricing Vendor’s disclosures stated that its bid-side evaluations 
represented its expectation of what the holder would receive in an orderly transaction for an 
institutional round lot position under current market conditions (“Pricing Vendor Marks”).  While 
there is no standard definition regarding what constitutes an odd lot or a round lot, for purposes of 
the findings in this Order, MIMBT evaluated an institutional round lot for the Relevant CMO 
positions as having at least $1 million current value.  The Pricing Vendor specifically disclosed that 
it did not provide separate evaluations for odd lot positions.       
 
3. The misconduct at issue involves interest only and inverse interest only (collectively 
“IO”) and last cash flow (“LCF”) bonds (collectively, the “Relevant CMOs”).  During the Relevant 
Period, MIMBT caused the Strategy Accounts to purchase approximately 4900 Relevant CMO 
positions, 90% of which were largely illiquid, odd lot positions (i.e., small-sized positions).  Odd lot 
positions in the Relevant CMOs typically traded at a significant discount to round lot positions (i.e., 
institutional, larger-sized positions) of the same bonds.   
 
4. During the Relevant Period, MIMBT and the RICs used round lot Pricing Vendor 
Marks to value the odd lot Relevant CMO positions.  MIMBT did not have a reasonable basis to 
believe that the Pricing Vendor Marks accurately reflected the price the Strategy Accounts could 
 
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 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other person 
or entity in this or any other proceeding. 
 

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reasonably expect to receive for the odd lot Relevant CMO positions in a current market sale.  As a 
result, thousands of Relevant CMO positions were marked at inflated prices.  MIMBT’s 
overvaluation of odd lot Relevant CMO positions resulted in MIMBT reporting overstated 
valuations and performance to the Unregistered Investment Vehicles and at certain times during the 
Relevant Period, overstating the RICs’ net asset value (“NAV”). 
 
5. MIMBT’s marketing materials stated that “liquidity” was a key advantage of the 
Strategy; however, most of the odd lot Relevant CMO positions held in the Strategy Accounts were 
largely illiquid and could not be sold in the open market at the round lot Pricing Vendor Marks.  In 
order to satisfy redemption requests from certain investors in one Unregistered Pooled Investment 
Vehicle during mid-2018, MIMBT executed numerous internal cross trades of Relevant CMO 
positions with the RICs over the course of two trading days to avoid or minimize losses to that 
selling Unregistered Pooled Investment Vehicle (the “2018 Internal Cross Trades”).  MIMBT also 
arranged for dealer-interposed cross trades to satisfy redemption requests from investors in certain 
Unregistered Pooled Investment Vehicles in which MIMBT temporarily sold odd lot Relevant 
CMO positions to third-party broker-dealers and then repurchased those same positions for 
allocation to one or more Strategy Accounts.   
 
6. By arranging these internal and dealer-interposed trades, MIMBT was able to 
execute the trades at prices that often deviated from current market prices.  As a result, certain 
Strategy Accounts (primarily the RICs) absorbed the trading losses that otherwise would                                                                                                
have been borne by the redeeming Unregistered Pooled Investment Vehicles.  MIMBT’s execution 
of the cross trades created undisclosed conflicts of interest and benefitted certain MIMBT advisory 
clients over others, in breach of MIMBT’s fiduciary duty of loyalty and duty of care under the 
Advisers Act.  Cross transactions involving the RICs also violated certain of the affiliated 
transactions prohibitions of the Investment Company Act. 
 
7. As a result of the conduct described above, certain of MIMBT’s marketing 
materials, due diligence questionnaires, performance reports, monthly commentary to investors, 
reports to the relevant RIC Boards of Trustees (“RIC Boards”), and Forms N-CSR filed with the 
Commission during the Relevant Period contained materially false and misleading statements and 
omissions about performance, liquidity, asset valuation, and cross trading involving the Strategy 
Accounts and related investments.    
 
8.    During the Relevant Period, MIMBT’s compliance department had responsibility 
for the implementation of its own compliance policies and procedures applicable to the Strategy 
Accounts (“MIMBT Compliance Policies”) as well as the implementation of the RIC compliance 
policies and procedures, as adopted and approved by the RIC Boards (“RIC Compliance Policies”) 
(collectively, the “Compliance Policies”).  MIMBT failed to implement the MIMBT Compliance 
Policies applicable to the Strategy Accounts relating to conflicts of interest, pricing, and cross trades 
and failed to implement the RIC Compliance Policies relating to the pricing of portfolio securities 
and cross trades. 
 
 

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                                                           Respondent 
 
9. Macquarie Investment Management Business Trust (“MIMBT”) is a Delaware 
statutory trust with its principal place of business in Philadelphia, Pennsylvania.  It is an indirect 
wholly owned subsidiary of Macquarie Group Limited, an Australian global financial services 
company, whose common stock trades on the Australian Securities Exchange (Ticker: MQG).  
During the Relevant Period, the statutory trust consisted of six series, including, among others, the 
Delaware Management Company series that provided investment advisory services to over 80 
U.S.-registered investment companies, and the Macquarie Investment Management Adviser series, 
that provided investment advisory services to, among others, institutional clients, separately 
managed accounts, and pooled investment vehicles domiciled in the U.S. and abroad.  MIMBT is 
an investment adviser registered with the Commission since May 31, 1988.  According to its most 
recent Form ADV filed with the Commission on June 28, 2024, MIMBT has approximately $191 
billion in regulatory assets under management.   
 
Background 
 
10. In 2007, MIMBT’s predecessor developed the Strategy and launched the first 
private fund to invest in Strategy investments and also created the related Absolute Return 
Mortgage-Backed Securities Composite (“Composite”), which tracked the Strategy’s annual 
performance.  In 2008, MIMBT acquired that initial fund and took over management of the 
Strategy and the Composite.  The Strategy’s core portfolio included fixed income securities, 
namely, MBS, treasury futures, and agency CMOs.  The Relevant CMO portion of the Strategy 
was a combination of IO tranches, representing the interest portion of the mortgage-backed security, 
and LCF tranches, representing the last tranche of the CMO to receive principal payment.  No new 
investor capital was invested in the Strategy after February 2019.  MIMBT discontinued the 
Strategy in April 2021, after the SEC commenced its investigation.    
 
11. During the Relevant Period, six Strategy Accounts were fully invested in Strategy 
investments and fourteen Strategy Accounts had a partial allocation to investments related to the 
Strategy.  During the Relevant Period, each RIC held less than 7% of its total investments in 
Relevant CMOs.  The Strategy was managed by a portfolio management team in MIMBT’s fixed 
income department.  This team was responsible for investment selection and trading decisions for 
each Strategy Account’s allocation to Strategy investments. 
 
12. During the Relevant Period, MIMBT substantially increased its marketing of the 
Strategy worldwide and steadily increased the allocation of Relevant CMOs to Strategy Accounts.  
According to Strategy monthly reports provided to investors, the assets under management 
(“AUM”) of Strategy Accounts fully invested in the Strategy increased from $13 million at the end 
of 2015, to over $1 billion at its peak in May 2018.  MIMBT marketing materials and investor 
correspondence reported that the Strategy’s total allocation to CMOs (including, but not limited to, 
the Relevant CMOs) reached approximately 75% in 2018.  Strategy Accounts with partial 
exposure to Strategy investments held approximately $1.1 billion in Relevant CMO positions as of 
May 2018.   

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13. During the Relevant Period, MIMBT earned over $7 million in advisory fees for 
managing the Strategy Accounts and related investments. 
 
Overvaluation of the Relevant CMOs 
 
14. The Compliance Policies relating to portfolio pricing directed that all debt 
securities, including CMOs, be priced on the basis of valuations provided by the Pricing Vendor.  
MIMBT’s Compliance Policies utilized the same valuation method as contained in the RIC 
Compliance Policies.  The Pricing Vendor’s disclosures stated that its published evaluated prices 
represented a good faith estimate of the price the holder of the security could reasonably expect to 
receive in an orderly transaction for a round lot position under current market conditions and did 
not provide separate valuations for odd lot positions.  According to the Compliance Policies, if 
valuations are not available from the Pricing Vendor, “then quotations will be obtained from 
brokers/dealers and valued at the mean between the bid and the offer if available, then the bid if 
available or the last available price when appropriate; otherwise fair value will be determined.”  
When market quotations are not available, the determinations of “fair value” will be made by the 
“Pricing Committee” and included criteria and pricing methodologies for the Pricing Committee to 
consider when determining fair value.  The Pricing Committee was responsible for the oversight of 
pricing for all Strategy Accounts.   
 
15. During the Relevant Period, odd lot positions of the Relevant CMOs generally 
traded at a significant discount to round lots of the same bonds.  MIMBT purchased the Relevant 
CMOs in both round lot and odd lot positions and then allocated a pro rata share to each 
participating Strategy Account.  When MIMBT purchased an odd lot position at a current market 
price and allocated it to the Strategy Accounts, the position was priced at the Pricing Vendor Mark 
intended for round lots, resulting in an immediate performance gain.  Even when MIMBT 
purchased Relevant CMOs for the Strategy Accounts in round lot positions, its practice of 
allocating round lots across multiple accounts typically resulted in Strategy Accounts holding 
Relevant CMOs in odd lot positions, which were then priced at the Pricing Vendor Mark intended 
for round lots.      
 
16. Trading records reflect over 3900 purchases of IO positions in Strategy Accounts 
during the Relevant Period.  Approximately 90% of these IOs were odd lot positions, and 
approximately 64% of those IO positions had a value under $100,000.  Trading records reflect 
approximately 1000 purchases of LCF positions in Strategy Accounts during the Relevant Period, 
and approximately 90% of these were odd lot positions.  All of these odd lot positions were 
improperly priced at Pricing Vendor Marks intended for round lots, which positively impacted the 
daily performance that MIMBT reported to the Unregistered Investment Vehicles and at certain 
times during the Relevant Period overstated the NAV of the RICs by at least $0.01 per share.  
MIMBT’s internal performance attribution reports, created for select Strategy Accounts, show that 
the positive performance in 2017 and 2018 was primarily attributed to the Relevant CMOs (and 
IOs, in particular).   
 

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17. In August 2018, MIMBT convened the Pricing Committee to address the pricing 
variance between Pricing Vendor Marks and market prices for odd lot Relevant CMOs.  The 
Pricing Committee directed the Strategy’s portfolio management team to conduct an analysis of the 
trading discount for odd lot Relevant CMO positions and to determine odd lot exposure across the 
Strategy Accounts.  
 
18. The Strategy’s portfolio management team prepared an internal pricing analysis for 
the Pricing Committee, which estimated that odd lot positions traded at discounts to Pricing 
Vendor Marks ranging from 3% to 28%, with the discount proportionally higher as the lot size 
decreased.  Among other things, the Pricing Committee considered and discussed the implications 
of a prior enforcement action that involved odd lot overvaluation and discussed options for valuing 
the Strategy’s odd lot CMO holdings, including to fair value the positions.  Ultimately, in 
September 2018, the Pricing Committee concluded that it was appropriate to continue utilizing the 
Pricing Vendor Marks with no adjustment based on trade lot size, reasoning that it was “industry 
practice” to do so.    
 
19. MIMBT did not implement the applicable pricing procedures contained in the 
Compliance Policies.  MIMBT improperly priced odd lot Relevant CMOs at Pricing Vendor 
Marks that were intended only for round lot positions.  Even though odd lot valuations were not 
available from the Pricing Vendor, MIMBT did not obtain market quotations from broker-dealers 
or take steps to fair value the odd lot Relevant CMO positions, as required by the Compliance 
Policies.  As a result, thousands of Relevant CMO positions held in Strategy Accounts were marked 
at inflated prices.  MIMBT’s overvaluation of odd lot Relevant CMO positions resulted in MIMBT 
reporting overstated performance to the Unregistered Investment Vehicles, and the RICs overstating 
NAV.  
 
Unlawful Cross Trading to Satisfy Redemptions 
 
20. Strategy marketing materials provided to certain Strategy Accounts stated that the 
Strategy focused on preservation of capital and risk management and that liquidity was a “key 
advantage and important distinguishing feature.”  In response to certain due diligence 
questionnaires from prospective clients regarding the liquidity of the Strategy, MIMBT stated that 
“100% of securities can be liquidated within 1-3 days, within 5% of current prices.”  However, 
during the Relevant Period, MIMBT typically could not sell the largely illiquid odd lot Relevant 
CMO positions at the round lot Pricing Vendor Marks.   
 
21. When certain investors in the Unregistered Pooled Investment Vehicles made 
redemption requests during 2017 and 2018, MIMBT partially funded the requests by cross trading 
odd lot Relevant CMO positions held in the redeeming account with other Strategy Accounts 
(primarily the RICs). During the Relevant Period, MIMBT engaged in approximately 465 internal 
cross trades and 175 dealer-interposed cross trades involving the Relevant CMOs.  These cross 
trades were not executed at a current market price.  MIMBT’s execution of the trades created 
undisclosed conflicts of interest and benefitted certain MIMBT advisory clients over others, in 

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breach of its fiduciary duty under the Advisers Act.  Cross trades involving the RICs also violated 
certain of the affiliated transactions prohibitions of the Investment Company Act.   
 
 
22. Cross trades can benefit clients because the practice enables a portfolio manager to 
move securities among client accounts without having to expose the security to the market thereby 
saving transaction and market costs that would otherwise be paid to executing broker-dealers.  
Conversely, these transactions can also pose substantial risks to clients due to the inherent conflict 
of interest for the adviser, which has a duty of loyalty and duty of care to seek best execution for 
each client.  
 
23. With respect to cross trades involving the RICs, Sections 17(a)(1) and 17(a)(2) of 
the Investment Company Act generally prohibit any affiliated person of a RIC or any affiliated 
person of the affiliated person, acting as principal, from knowingly selling a security to or 
purchasing a security from the RIC unless the person first obtains an exemptive order from the 
Commission under Section 17(b).  Rule 17a-7 under the Investment Company Act exempts from 
these prohibitions certain cross trades where the affiliation between a RIC and its trading 
counterparty arises solely because the two have a common investment adviser, or investment 
advisers that are affiliated persons of each other, common directors, or officers, provided that the 
cross trades are effected in accordance with Rule 17a-7.  Rule 17a-7 requires, among other things, 
that cross trades be executed at the “independent current market price,” which is defined in 
relevant part as “the average of the highest current independent bid and lowest current independent 
offer determined on the basis of reasonable inquiry.”  If a brokerage commission, fee, or other 
remuneration is paid in connection with the cross trade, the cross trade is not eligible for an 
exemption under Rule 17a-7 and is therefore, impermissible. 
 
24. Section 48(a) of the Investment Company Act prohibits “any person, directly or 
indirectly, to cause to be done any act or thing through or by means of any other person which it 
would be unlawful for such person to do” under the Investment Company Act or the rules 
thereunder.  The Commission has stated that interpositioning a dealer in cross trades does not 
remove the cross trades from the prohibitions of Section 17(a).  See Exemption of Certain 
Purchase or Sale Transactions Between a Registered Investment Company and Certain Affiliated 
Persons Thereof, Investment Company Act Release No. 11136, 1980 WL 29973, at *2 n.10 (Apr. 
21, 1980).   
 
25. During the Relevant Period, the Compliance Policies were designed to ensure that 
cross trades involving the RICs were executed in compliance with Rule 17a-7 under the Investment 
Company Act.  Included among the Compliance Policies was an internal desktop procedure 
outlining the steps required for the Compliance Department to review and approve all cross trades 
(the “Cross Trade Approval Policy”).  The Cross Trade Approval Policy permitted cross trades only 
if certain conditions were met.  Among other things, the Cross Trade Approval Policy required 
MIMBT compliance personnel to confirm that:  (i) the securities involved were not illiquid; (ii) the 
quantity of shares being traded was equal between client accounts; (iii) the cross trades were 
between RICs, and no separately managed accounts were involved; (iv) the cross trades would 

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benefit every client account involved; (v) the Portfolio Manager for all accounts involved approved 
the cross trade; and (vi) the transaction was effected at the independent current market price of the 
security.  The Compliance Policies did not specifically address dealer-interposed cross trades.   
 
Prohibited Dealer-Interposed Cross Trades 
 
26. Trading records reflect that during the Relevant Period, MIMBT engaged in more 
than 175 dealer-interposed cross trades of odd lot Relevant CMOs in order to partially satisfy 
pending redemption requests from certain investors in Unregistered Pooled Investment Vehicles.  
MIMBT temporarily sold odd lot positions to a third-party broker-dealer and then repurchased the 
same position from that broker-dealer for one or more Strategy Accounts at a markup.  The trades 
were not executed at a current market price.  By executing these trades, MIMBT was able to 
provide the redeeming Unregistered Pooled Investment Vehicles liquidity in a largely illiquid 
market and minimized trading losses for the redeeming clients. 
 
27. For example, in March 2017, an investor in one Unregistered Pooled Investment 
Vehicle with approximately $20 million invested in Strategy-related investments requested a $8.4 
million redemption.  To partially satisfy the redemption request, MIMBT temporarily sold 
approximately 60 odd lot IO positions to a third-party broker-dealer at the Pricing Vendor Mark 
and repurchased those same securities, from the same broker-dealer at the Pricing Vendor Mark 
(plus a small markup) for two of the RICs.  The cross trading benefitted the redeeming 
Unregistered Pooled Investment Vehicle, which sold the odd lot positions at prices higher than the 
independent current market price, but disadvantaged the two RICs which purchased the odd lot 
positions at prices higher than the independent current market price.  MIMBT then improperly 
priced the odd lot positions purchased by these RICs at the round lot Pricing Vendor Marks.   
 
28. From June through August 2018, investors in two other Unregistered Pooled 
Investment Vehicles made a series of redemption requests, leading to the eventual full liquidation 
of both Unregistered Pooled Investment Vehicles.  These Unregistered Pooled Investment Vehicles 
collectively held approximately 425 odd lot Relevant CMO positions that could not be sold at 
Pricing Vendor Marks.  MIMBT temporarily sold approximately 100 of the odd lot Relevant CMO 
positions to certain third-party broker-dealers and repurchased those same securities from the same 
broker-dealers for certain other Strategy Accounts.  The trades were not executed at a current 
market price, and the repurchases all included a markup.  The cross trading benefitted the 
redeeming Unregistered Pooled Investment Vehicles, which sold the odd lot positions at prices 
higher than a current market price, but disadvantaged the purchasing Strategy Accounts, which 
purchased the odd lot positions at prices higher than a current market price.  MIMBT then 
improperly valued the odd lot positions purchased for the Strategy Accounts at the round lot 
Pricing Vendor Marks (i.e., above their fair value).  MIMBT’s execution of the trades created 
undisclosed conflicts of interest and benefitted certain MIMBT advisory clients over others, in 
breach of its fiduciary duty under the Advisers Act.  Cross trades involving the RICs also violated 
certain of the affiliated transactions prohibitions of the Investment Company Act.   
 

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29. MIMBT’s compliance systems and controls did not detect the unlawful dealer- 
interposed cross trading, even though the trades involved the same thinly-traded bond being sold 
and repurchased through the same broker-dealer, in the same odd lot size, and involved MIMBT 
accounts on both sides of the transaction.   
 
Prohibited Internal Cross Trades 
 
30. After MIMBT effected the series of dealer-interposed cross trades as identified 
above, the two redeeming Unregistered Pooled Investment Vehicles still held odd lot Relevant 
CMOs that needed to be sold to satisfy remaining investor redemption requests.  The Strategy 
portfolio management team informed the MIMBT distribution and compliance departments that 
the pricing discounts for the remaining odd lot IO securities could be as much as 40% to 50% 
below the Pricing Vendor Marks.  MIMBT personnel discussed in an email the possibility of 
internally cross trading the securities to other Strategy Accounts as an option to “benefit the 
redeeming investor.”  
 
31. On July 30, 2018, MIMBT directed the sale of 134 IO positions from one of the 
redeeming Unregistered Pooled Investment Vehicles.  The sales were effected through 
approximately 450 internal cross trades between that Unregistered Pooled Investment Vehicle and 
the RICs.  Each cross trade involved an odd lot IO position, and nearly 80% of the cross trades 
involved IO positions valued at less than $100,000.  All cross trades were executed above 
independent current market prices.  These internal cross trades resulted in the RICs absorbing 
losses that otherwise would have been borne by the redeeming Unregistered Pooled Investment 
Vehicles in a market sale.  MIMBT’s compliance department approved these internal cross 
transactions.  However, the compliance department did not verify that “the Portfolio Manager (or 
designee) for all accounts involved had approved the trade,” as required by the Cross Trade 
Approval Policy.  
 
32. On August 27, 2018, MIMBT directed the sale of two additional IO positions from 
the same redeeming Unregistered Pooled Investment Vehicle.  The sales were effected through 15 
internal cross trades with seven RICs.  These internal cross trades similarly resulted in the RICs 
absorbing losses that otherwise would have been borne by the redeeming Unregistered Pooled 
Investment Vehicle in a market sale.  MIMBT’s compliance department approved the 15 internal 
cross trades.  However, the compliance department did not verify that the relevant portfolio 
managers for all RICs involved had approved the trades.  In total, more than 95% of the Relevant 
CMO sales from this redeeming Unregistered Pooled Investment Vehicle were effected through 
unlawful cross transactions.    
 
33. Also in August 2018, MIMBT directed a series of internal cross trades of odd lot IO 
positions between the second redeeming Unregistered Pooled Investment Vehicle and two RICs.  
However, the day before the scheduled cross trades, the portfolio manager for the purchasing RICs 
learned about the proposed trades.  He notified the Strategy portfolio management team and the 
MIMBT compliance department that he had not authorized any cross trades into the RICs he 
managed.  As a result, the cross trades were canceled.   

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34. MIMBT’s execution of the dealer-interposed and internal cross trades at prices 
other than a current market price created undisclosed conflicts of interest and benefitted certain 
MIMBT advisory clients over others, in breach of MIMBT’s fiduciary duty of loyalty and duty of 
care under the Advisers Act.    
 
35. Additionally, none of the dealer-interposed or internal cross trades described above 
involving the RICs complied with Rule 17a-7 under the Investment Company Act or the applicable 
Compliance Policies.  MIMBT did not seek an exemptive order for the cross transactions, and the 
transactions were not exempt from the prohibition by virtue of Rule 17a-7 because the trades were 
not executed at current independent market prices, and the dealer-interposed cross trades were 
made through one or more broker-dealers who received remuneration in connection with the 
transaction.  Moreover, MIMBT did not ensure that the cross trades complied with internal 
Compliance Policies.  For example, compliance personnel failed to confirm that no separately 
managed accounts were involved in the trades, that the odd lot positions in the cross trades were 
not illiquid securities, and that the cross trades benefitted every account involved.  In fact, the cross 
trades resulted in the RICs purchasing largely illiquid securities from certain Unregistered Pooled 
Investment Vehicles and absorbing losses that otherwise would have been borne by those 
Unregistered Pooled Investment Vehicles.  Moreover, compliance personnel did not verify that the 
portfolio manager for all accounts involved approved each cross trade.   
 
Undisclosed Odd Lot Repositioning Plan  
 
36. In September 2018, following the cross trades described above, concerns relating to 
the valuation of the Relevant CMOs and related liquidity risks to Strategy Accounts, potential 
conflicts of interest, and the adequacy of Strategy disclosures were elevated to MIMBT’s risk 
team, which subsequently prepared a memorandum to update the MIMBT Executive Committee.  
Although MIMBT implemented certain changes to address the concerns, including discontinuing 
purchasing odd lot positions, MIMBT did not implement policies and procedures to fair value 
existing odd lot positions or disclose to investors the liquidity risks the existing odd lot positions 
had on Strategy Accounts.   
 
37. After the scheduled cross trades involving the second redeeming Unregistered 
Pooled Investment Vehicle were canceled, more than half of the Relevant CMO positions 
remained in that account.  Throughout September and October 2018, MIMBT sold more than 80 of 
the remaining odd lot positions by aggregating them with identical positions held in certain other 
Strategy Accounts to create a round lot or larger odd lot position.  These positions were ultimately 
sold in the open market at a loss from Pricing Vendor Marks, but the losses were reduced by 
aggregating the positions with those held in other Strategy Accounts.  Several Strategy Account 
investors asked MIMBT about the reasons these positions were sold at a loss relative to the Pricing 
Vendor Marks.  MIMBT did not disclose the known overvaluation of odd lot positions but instead 
blamed the losses solely on market conditions.   
 
38. In March 2019, MIMBT replaced a co-portfolio manager of the Strategy.  After this 
change, one of the Unregistered Investment Vehicles lost two buy ratings and began experiencing a 

11 
 
significant increase in redemption requests.  At that time, approximately one-third of that fund’s 
portfolio was comprised of odd lot Relevant CMO positions.  MIMBT management was concerned 
about the fund’s liquidity if redemptions continued, estimating that the odd lot positions may have 
to be sold at a 12% discount from Pricing Vendor Marks, materially impacting the Unregistered 
Investment Vehicle’s performance.  MIMBT ultimately approved a plan to rebalance the Strategy 
Accounts by aggregating identical odd lot Relevant CMO positions held by the Strategy Accounts 
and then selling the positions in the open market in two stages, first for one week commencing 
April 15, 2019, followed by another round of sales for the week commencing May 13, 2019.     
 
39. Strategy Accounts were not given any prior notice of the planned sales, and the 
trading had a negative impact on portfolio performance of the Strategy Accounts.  One Strategy 
Account questioned MIMBT about the losses resulting from the sales.  MIMBT management 
instructed personnel not to communicate proactively with the Strategy Accounts about the sales but 
instead to use the standard monthly commentary (“Monthly Reports”) as the primary method of 
informing clients.  However, the Monthly Reports did not include complete and accurate 
information about the extent of Relevant CMO odd lot positions held in the portfolios, MIMBT’s 
inability to sell these positions at the Pricing Vendor Marks, or the repositioning of the odd lot 
holdings.        
   
40.  MIMBT discontinued the Strategy in April 2021.   
 
False and Misleading Disclosures  
 
Marketing Materials and Performance Reports 
 
41. Throughout the Relevant Period, MIMBT made materially false and misleading 
statements regarding performance, liquidity, and valuation of investments related to Strategy 
Accounts in certain marketing materials and performance reports.   
 
42. Strategy marketing materials provided to actual and prospective clients included 
Strategy quarterly updates and responses to due diligence questionnaires and requests for 
information.  Throughout the Relevant Period, marketing materials stated that liquidity was a “key 
advantage and important distinguishing feature” of the Strategy and described Strategy investments 
as “highly liquid.”  For example, in response to certain due diligence questionnaires from 
prospective clients and investors regarding the liquidity of the Strategy, MIMBT stated that “100% 
of securities can be liquidated within 1-3 days, within 5% of current prices.”  However, for the 
reasons described above, Relevant CMOs were largely illiquid and could not be sold at the Pricing 
Vendor Marks.  No marketing materials disclosed that odd lots of the Relevant CMOs were being 
valued at higher, round lot prices or that the securities were generally illiquid.     
 
43. Throughout the Relevant Period, MIMBT disseminated to Strategy Accounts 
Monthly Reports for the Strategy and related investments.  The Monthly Reports included 
overstated performance returns for the Strategy that were calculated using improper valuations for 
the Relevant CMOs.  None of the Monthly Reports disclosed the overvaluation of the Relevant 

12 
 
CMOs, the liquidity risks inherent in those positions, the unlawful cross trading, or the planned 
repositioning in 2018 to sell existing odd lot holdings.     
 
Annual Reports Filed with the Commission 
    
44. Throughout the Relevant Period, MIMBT made materially false and misleading 
statements regarding valuation of client assets and the source of fund performance in annual 
reports filed with the Commission on Forms N-CSR that it prepared for the RICs (“Annual 
Reports”). 
 
45. For example, the Annual Report for one RIC for the period ended March 31, 2017, 
noted in the “Portfolio Management Review” section that investments in Relevant CMOs 
outperformed two relevant benchmarks and contributed to the fund’s positive performance.  The 
Annual Reports for one RIC for the period ended July 31, 2017, two RICs for the period ended 
October 31, 2017, and one RIC for the period ended December 31, 2017, similarly noted that 
Relevant CMOs contributed to positive performance.  However, none of the Annual Reports 
disclosed that Relevant CMOs were overvalued and had not been priced in accordance with RIC 
Compliance Policies.   
 
46. MIMBT’s subsequent reduction of Relevant CMO positions in Strategy Accounts 
following the 2018 Internal Cross Trades negatively impacted the performance of the RICs.  Each 
of the Annual Reports filed after the 2018 Internal Cross Trades disclosed underperformance 
during the period, however, these reports materially misstated MIMBT’s rationale for selling the 
Relevant CMOs and the resulting losses.  For example, the Annual Report for one RIC for the 
period ended March 31, 2019, noted that the fund had reduced its Relevant CMO allocation during 
the “second half of 2018 and . . . the first quarter of 2019”, and Relevant CMO returns were “quite 
negative” and a “large drag on performance.”  However, the report omitted any disclosure about 
the performance impact resulting from the overvaluation and illiquidity of those positions.  
Moreover, that report failed to disclose the RICs’ purchases of Relevant CMOs at above-market 
prices through cross trades during the same period.  Similarly, Annual Reports for two RICs for the 
period ended October 31, 2018, disclosed that the funds had begun to unwind investments in 
Relevant CMOs in late 2018 because they “were no longer attractive in a more volatile 
environment” but omitted any disclosure about the illiquidity and overvaluation of the positions.  
 
47. None of the relevant Annual Reports disclosed the unlawful cross trading between 
the RICs and other Strategy Accounts occurring throughout 2018, and the resulting impact of the 
RICs absorbing losses that would otherwise have been borne by redeeming Strategy Accounts.     
 
Reports to the RIC Boards 
 
48. During the Relevant Period, the RIC Compliance Policies required that all trades 
effected pursuant to Rule 17a-7 under the Investment Company Act be identified and reported to 
the relevant RIC Boards on a quarterly basis.  In October 2018, MIMBT’s compliance department 
provided its quarterly compliance reports (“Quarterly RIC Reports”) to the RIC Boards, which 

13 
 
included information summarizing cross trades that occurred between July and September 2018 
(“Quarter”).  The Quarterly RIC Reports misrepresented that all cross trades executed during the 
Quarter were conducted in accordance with Rule 17a-7 under the Investment Company Act and the 
RIC Compliance Policies.  Specifically, the Quarterly RIC Reports misrepresented that each cross 
trade was effected at the independent current market price of the security, was consistent with the 
policy of each fund participating in the transactions and effected without any brokerage 
commission.  One Quarterly RIC Report indicated that the cross trades during the Quarter resulted 
from excess cash and the portfolio manager’s belief that the securities purchased were desirable for 
the fund.  Another Quarterly RIC Report stated that the portfolio manager was looking to increase 
the fund’s position in the identified security, and that the “17a-7 purchases were preferable to 
buying the security in the market.”   
 
49. The Quarterly RIC Reports did not disclose that hundreds of the internal cross 
trades were effected with Unregistered Pooled Investment Vehicles in order to satisfy those 
vehicles’ redemption requests and involved odd lot Relevant CMO positions that could not be sold 
in the open market at Pricing Vendor Marks.  Moreover, the Quarterly RIC Reports failed to report 
any dealer-interposed cross trades.   
 
Compliance Deficiencies 
 
50. Rule 38a-1 under the Investment Company Act requires each registered investment 
company to adopt and implement written policies and procedures reasonably designed to prevent 
violations of the federal securities laws.  Section 206(4)-7 promulgated under Section 206(4) of the 
Advisers Act requires that registered investment advisers adopt and implement written policies and 
procedures reasonably designed to prevent violations of the Advisers Act and the rules thereunder.   
 
51. During the Relevant Period, the RIC Compliance Policies included written policies 
and procedures relating to pricing of portfolio securities and cross trades.  However, during the 
Relevant Period, as described above, MIMBT caused the RICs to fail to implement the funds’ 
pricing and cross trading policies and procedures that were designed to ensure, among things, that 
(i) the pricing of portfolio securities was accurate; and (ii) cross trades were disclosed to the Board 
of Trustees and complied with Rule 17a-7 under the Investment Company Act.  
 
52.  During the Relevant Period, the MIMBT Compliance Policies included written 
policies and procedures relating to MIMBT’s fiduciary duty to provide disinterested advice and 
disclose any material conflicts of interest to its clients.  During the Relevant Period, as described 
above, MIMBT failed to implement these policies and procedures by favoring certain advisory 
clients when directing and executing cross trades and failing to comply with the Cross Trade 
Approval Policy. 
 
53. In October 2023, MIMBT retained a compliance consultant (“Compliance 
Consultant”) to, among other things, perform a comprehensive review of its policies and 
procedures.  MIMBT has taken steps to enhance its policies, procedures, controls, and training 
regarding, among other things, valuation, cross trading, conflicts of interest and disclosures.  In 

14 
 
addition, MIMBT hired a new chief compliance officer and a senior securities valuation specialist 
and is adding additional compliance staff.  MIMBT has also implemented a new automated trade 
surveillance system.   
 
Violations 
 
54. As a result of the conduct described above related to the 2018 Internal Cross 
Trades, MIMBT willfully violated Section 206(1) of the Advisers Act, which makes it unlawful for 
an investment adviser to employ any device, scheme or artifice to defraud any client or prospective 
client.  Scienter is required to establish a violation of Section 206(1) of the Advisers Act.  SEC v. 
Steadman, 967 F.2d 636, 641-42 (D.C. Cir. 1992). 
 
55. As a result of the conduct described above, MIMBT willfully violated Section 
206(2) of the Advisers Act, which prohibits investment advisers from “engag[ing] in any 
transaction, practice, or course of business which operates as a fraud or deceit upon any client or 
prospective client.”  Scienter is not required to establish a violation of Section 206(2) of the 
Advisers Act, which may rest on a finding of negligence.  Id. at 643 n.5. 
 
56. As a result of the conduct described above, MIMBT willfully violated Section 
206(4) of the Advisers Act and Rule 206(4)-7 thereunder, which require investment advisers to 
adopt and implement written policies and procedures reasonably designed to prevent violations of 
the Advisers Act and the Rules thereunder.  A violation of Section 206(4) and the rules thereunder 
does not require scienter and may rest on a finding of simple negligence.  Id. at 647.  
 
57. As a result of the conduct described above, MIMBT willfully violated Section 
206(4) of the Advisers Act and Rule 206(4)-8 thereunder, which make it unlawful for any 
investment adviser to a pooled investment vehicle to make any untrue statement of material fact or 
omit to state a material fact necessary to make the statements made, in light of the circumstances 
under which they were made, not misleading, to any investor or prospective investor in the pooled 
investment vehicle, or otherwise engage in any act, practice, or course of business that is 
fraudulent, deceptive, or manipulative with respect to any investor or prospective investor in the 
pooled investment vehicle.  A violation of Section 206(4) and the rules thereunder does not require 
scienter and may rest on a finding of simple negligence.  Id. at 647.   
  
58. As a result of the conduct described above, MIMBT caused the RICs to violate 
Sections 17(a)(1) and 17(a)(2) of the Investment Company Act, which make it unlawful for any 
affiliated person or promoter of or principal underwriter for a RIC or any affiliated person of such a 
person, promoter, or principal underwriter, acting as principal (1) knowingly to sell any security or 
other property to such RIC or to any company controlled by such RIC, or (2) knowingly to 
purchase from such RIC, or from any company controlled by such RIC, any security or other 
property, unless the transaction complies with the exemptive requirements of Rule 17a-7 under the 
Investment Company Act, or the adviser obtains an exemptive order under 17(b) of the Investment 
Company Act.  MIMBT did not seek an exemptive order for the cross transactions MIMBT 
effected, and the transactions were not exempt from the prohibition by virtue of Rule 17a-7 

15 
 
because the dealer-interposed trades were made through one or more broker-dealers who received 
remuneration in connection with the transaction.  Moreover, the transactions were not executed at a 
price equal to the average of the highest current independent bid to purchase that security and the 
lowest current independent offer to sell that security, determined on the basis of reasonable inquiry.   
 
59. Section 34(b) of the Investment Company Act makes it unlawful for any person to 
make any untrue statement of material fact in any registration statement, application, report, 
account, record, or other document filed with the Commission under the Investment Company Act, 
or the keeping of which is required pursuant to Section 31(a) of the Investment Company Act, or to 
omit from any such document any fact necessary in order to prevent the statements made therein 
from being materially misleading.  As a result of the conduct described above, MIMBT willfully 
violated Section 34(b) of the Investment Company Act.  Establishing a violation of Section 34(b) 
of the Investment Company Act does not require proof of scienter.  See In the Matter of 
Fundamental Portfolio Advisors, Inc., Advisers Act Rel. No. 2146, 2003 WL 21658248, at *8 
(July 15, 2003) (Commission Opinion). 
 
60. As a result of the conduct described above, MIMBT caused the RICs to violate 
Rule 22c-1 under the Investment Company Act which prohibits registered investment companies, 
among others, from the sale, redemption, or repurchase of the investment company’s redeemable 
securities except at a price based on the current net asset value of such security.   
 
61. As a result of the conduct described above, MIMBT caused the RICs to violate 
Rule 38a-1 under the Investment Company Act, which requires a registered investment company 
to adopt and implement written policies and procedures reasonably designed to prevent violations 
of the federal securities laws.   
 
Disgorgement and Prejudgment Interest 
 
62. The disgorgement and prejudgment interest ordered in Section IV.C are consistent 
with equitable principles, do not exceed Respondent’s net profits from its violations, and will be 
distributed to harmed investors, if feasible.  The Commission will hold funds paid pursuant to 
Section IV.C in an account at the United States Treasury pending a decision whether the 
Commission in its discretion will seek to distribute funds.  If a distribution is determined feasible 
and the Commission makes a distribution, upon approval of the distribution final accounting by the 
Commission, any amounts remaining that are infeasible to return to investors, and any amounts 
returned to the Commission in the future that are infeasible to return to investors, may be 
transferred to the general fund of the U.S. Treasury subject to Section 21F(g)(3) of the Exchange 
Act.   
 
Undertakings 
 
63. Effective upon entry of this Order, MIMBT undertakes to continue to retain the 
services of the Compliance Consultant, exclusively bearing all costs, including compensation and 
expenses, associated with the retention of the Compliance Consultant.   

16 
 
64. MIMBT shall cooperate fully with the Compliance Consultant and shall provide the 
Compliance Consultant with access to its files, books, records, and personnel as reasonably 
requested by the Compliance Consultant.  For the period of the engagement, MIMBT: (1) shall not 
have the authority to terminate the Compliance Consultant or substitute another compliance 
consultant for the Compliance Consultant without the prior written approval of the Commission 
staff; and (2) shall compensate the Compliance Consultant and persons engaged to assist the 
Compliance Consultant for services rendered pursuant to this Order at their reasonable and 
customary rates. 
 
65. MIMBT shall require the Compliance Consultant to conduct a comprehensive 
review of the effectiveness and implementation of MIMBT’s compliance policies and procedures, 
relating to: (1) valuation of Relevant CMOs and associated liquidity risks; (2) cross trading; and (3) 
advisory conflicts of interest and disclosures with respect to (1) and (2) above (collectively, the 
“Policies and Procedures”).  MIMBT shall require the Compliance Consultant to provide MIMBT 
with any recommendations for changes or improvements to the effectiveness and implementation 
of the Policies and Procedures as the Compliance Consultant deems appropriate. 
 
66. The Compliance Consultant shall review MIMBT’s Policies and Procedures for a 
period of two years and generate, during that period, an initial report (“Initial Report”) in February 
2025 assessing the extent to which the Policies and Procedures comply with the Investment 
Company Act, the Advisers Act, and regulations promulgated thereunder, and making specific 
recommendations for improvements to the Policies and Procedures.  The Initial Report shall 
include a description of the review performed, the names of the individuals who performed the 
review, the conclusions reached, and the Compliance Consultant’s recommendations for changes 
in or improvements to MIMBT’s Policies and Procedures. 
 
67. The Compliance Consultant shall also generate a final report (“Final Report”) 
(together with the Initial Report, the “Reports”) twenty-four months after its initial engagement.  
The Compliance Consultant will conduct a review of the adoption and implementation of its 
recommendations and confirm that they have been fully implemented.  The Final Report will 
include a description of how MIMBT has adopted and implemented the recommendations and 
provide a final assessment as to whether the Policies and Procedures are reasonably designed to 
prevent violations of the federal securities laws.  MIMBT shall provide a copy of each of the 
Reports to the Commission.  
 
68. MIMBT shall adopt all recommendations contained in the Initial Report within 
forty-five (45) days of the date of the report; provided, however, that within thirty (30) days after 
the date of the report, MIMBT shall in writing advise the Compliance Consultant and the 
Commission staff of any recommendations that MIMBT considers to be unduly burdensome, 
impractical, or inappropriate.  With respect to any recommendation that MIMBT considers to be 
unduly burdensome, impractical, or inappropriate, MIMBT need not adopt that recommendation at 
that time but shall propose in writing an alternative policy, procedure, or system designed to 
achieve the same objective or purpose. 

17 
 
69. As to any recommendation on which MIMBT and the Compliance Consultant do not 
agree, MIMBT shall attempt in good faith to reach an agreement with the Compliance Consultant 
on an alternative proposal within sixty (60) days after the submission of the Initial Report. Within 
fifteen (15) days after the conclusion of the discussion and evaluation by MIMBT and the 
Compliance Consultant, MIMBT shall require that the Compliance Consultant inform MIMBT and 
the Commission staff in writing of the Compliance Consultant’s final determination concerning any 
recommendation to which MIMBT has objected.  MIMBT shall abide by the determinations of the 
Compliance Consultant.  Within thirty (30) days after the final agreement between MIMBT and the 
Compliance Consultant or final determination of the Compliance Consultant, whichever occurs 
first, MIMBT shall adopt and implement all of the recommendations that the Compliance 
Consultant deems appropriate. 
 
70. For good cause shown and upon timely application of MIMBT, the Commission 
staff may extend any of the procedural dates relating to the undertakings.  Deadlines for procedural 
dates shall be counted in calendar days, except that if the last day falls on a weekend or federal 
holiday, the next business day shall be considered to be the last day.  
 
71. For the period of engagement and for a period of two years from completion of the 
engagement,  MIMBT undertakes not to (i) retain the Compliance Consultant for any other 
professional services outside of the services described in this Order; (ii) enter into any other 
professional relationship with the Compliance Consultant, including any employment, consultant, 
attorney-client, auditing or other professional relationship; or (iii) enter, without prior written 
consent of the Commission staff, into any such professional relationship with any of the 
Compliance Consultant’s present or former affiliates, employers, directors, officers, employees, or 
agents acting in their capacity as such.  
 
72. The Reports and related written communications of the Compliance Consultant will 
likely include confidential financial, proprietary, competitive business or commercial information.  
Public disclosure of a Report could discourage cooperation, impede pending or potential 
government investigations or undermine the objectives of the reporting requirement.  For these 
reasons, among others, Reports and the contents thereof are intended to remain and shall remain 
non-public, except (1) pursuant to court order, (2) as agreed to by the parties in writing, (3) to the 
extent that the Commission determines in its sole discretion that disclosure would be in furtherance 
of the Commission’s discharge of its duties and responsibilities, or (4) as otherwise required by 
law.  
 
73. MIMBT shall preserve, for a period of not fewer than six (6) years from the end of 
the fiscal year last used, the first two (2) years in an easily accessible place, any record of 
compliance with these undertakings.  
 
74. MIMBT shall certify, in writing, compliance with the undertakings set forth above.  
The certification shall identify the undertakings, provide written evidence of compliance in the 
form of a narrative, and be supported by exhibits sufficient to demonstrate compliance.  The 
Commission staff may make reasonable requests for further evidence of compliance, and 

18 
 
Respondent agrees to provide such evidence.  The certification and supporting material shall be 
submitted to Glenn S. Gordon, Associate Regional Director, Securities and Exchange Commission, 
801 Brickell Avenue, Suite 1950, Miami, FL 33131, with a copy to the Office of the Chief Counsel 
of the Enforcement Division, no later than sixty (60) days from the date of completion of the 
undertakings.  
 
75. MIMBT shall cooperate fully with the Commission in any and all investigations, 
litigations or other proceedings relating to or arising from the matters described in the Order.  In 
connection with such cooperation, MIMBT shall: (i) produce, without service of a notice or 
subpoena, any and all non-privileged documents and other information requested by the 
Commission staff subject to any restrictions under the law of any foreign jurisdiction; (ii) use its 
best efforts to cause their officers, employees, and directors to be interviewed by the Commission 
staff at such time as the staff reasonably may direct; and (iii) use its best efforts to cause their 
officers, employees, and directors to appear and testify without service of a notice or subpoena in 
such investigations, depositions, hearings or trials as may be requested by the Commission staff.  
In determining whether to accept the Offer, the Commission has considered this undertaking. 
 
IV. 
 
In view of the foregoing, the Commission deems it appropriate and in the public interest to 
impose the sanctions agreed to in Respondent MIMBT’s Offer. 
 
Accordingly, pursuant to Sections 203(e) and 203(k) of the Advisers Act, and Sections 9(b) 
and 9(f) of the Investment Company Act, it is hereby ORDERED that: 
 
A. Respondent MIMBT cease and desist from committing or causing any violations 
and any future violations of Sections 206(1), 206(2), and206(4) of the Advisers Act and Rules 
206(4)-7 and 206(4)-8 thereunder, and Sections 17(a)(1) and (a)(2) and 34(b) of the Investment 
Company Act and Rules 22c-1 and 38a-1 thereunder. 
 
B. Respondent MIMBT is censured. 
 
C. Respondent MIMBT shall within 10 days of the entry of this Order, pay 
disgorgement of $7,633,671 and prejudgment interest of $2,197,535 to the Securities and 
Exchange Commission.  The Commission will hold funds paid pursuant to this paragraph in an 
account at the United States Treasury pending a decision whether the Commission, in its 
discretion, will seek to distribute funds or, transfer them to the general fund of the United States 
Treasury, subject to Section 21F(g)(3).  If timely payment is not made, additional interest shall 
accrue pursuant to SEC Rule of Practice 600. 
 
D. Respondent MIMBT shall, within 10 days of the entry of this Order, pay a civil 
money penalty in the amount of $70,000,000 to the Securities and Exchange Commission.  The 
Commission may distribute civil money penalties collected in this proceeding if, in its discretion, 
the Commission orders the establishment of a Fair Fund pursuant to 15 U.S.C. § 7246, Section 

19 
 
308(a) of the Sarbanes-Oxley Act of 2002.  The Commission will hold funds paid pursuant to this 
paragraph in an account at the United States Treasury pending a decision whether the Commission, 
in its discretion, will seek to distribute funds or, subject to Exchange Act Section 21F(g)(3), 
transfer them to the general fund of the United States Treasury.  If timely payment is not made, 
additional interest shall accrue pursuant to 31 U.S.C. § 3717.   
 
Payment must be made in one of the following ways: 
 
(1) Respondent may transmit payment electronically to the Commission, which will provide 
detailed ACH transfer/Fedwire instructions upon request; 
 
(2) Respondent may make direct payment from a bank account via Pay.gov through the SEC 
website at http://www.sec.gov/about/offices/ofm.htm; or 
 
(3) Respondent may pay by certified check, bank cashier’s check, or United States postal 
money order, made payable to the Securities and Exchange Commission and hand-
delivered or mailed to: 
 
Enterprise Services Center  
Accounts Receivable Branch  
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169     
 
Payments by check or money order must be accompanied by a cover letter identifying 
MIMBT as a Respondent in these proceedings, and the file number of these proceedings; a copy of 
the cover letter and check or money order must be sent to Glenn S. Gordon, Associate Regional 
Director, Division of Enforcement, Securities and Exchange Commission, 801 Brickell Avenue 
Suite 1950, Miami, FL 33131. 
 
E. Regardless of whether the Commission in its discretion orders the creation of a Fair 
Fund for the penalties ordered in this proceeding, amounts ordered to be paid as civil money 
penalties pursuant to this Order shall be treated as penalties paid to the government for all 
purposes, including all tax purposes.  To preserve the deterrent effect of the civil penalty, 
Respondent agrees that in any Related Investor Action, it shall not argue that it is entitled to, nor 
shall it benefit by, offset or reduction of any award of compensatory damages by the amount of any 
part of Respondent’s payment of a civil penalty in this action (“Penalty Offset”).  If the court in 
any Related Investor Action grants such a Penalty Offset, Respondent agrees that it shall, within 30 
days after entry of a final order granting the Penalty Offset, notify the counsel in this action and 
pay the amount of the Penalty Offset to the Securities and Exchange Commission.  Such a payment 
shall not be deemed an additional civil penalty and shall not be deemed to change the amount of 
the civil penalty imposed in this proceeding.  For purposes of this paragraph, a “Related Investor  

20 
 
Action” means a private damages action brought against Respondent by or on behalf of one or 
more investors based on substantially the same facts as alleged in the Order instituted by the 
Commission in this proceeding. 
 
F. Respondent MIMBT shall comply with the undertakings enumerated in paragraphs 
63 to 74.   
 
 By the Commission. 
 
 
 
Vanessa A. Countryman 
Secretary 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

INVESTMENT ADVISERS ACT OF 1940 

Release No. 6709 / September 19, 2024 

 

INVESTMENT COMPANY ACT OF 1940 

Release No. 35325 / September 19, 2024 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-22144 

 

 

In the Matter of 

 

MACQUARIE INVESTMENT 

MANAGEMENT BUSINESS 

TRUST,  

 

Respondent. 

 

 

 

 

 

 

ORDER INSTITUTING ADMINISTRATIVE 

AND CEASE-AND-DESIST PROCEEDINGS, 

PURSUANT TO SECTIONS 203(e) AND 

203(k) OF THE INVESTMENT ADVISERS 

ACT OF 1940, AND SECTIONS 9(b) AND 

9(f) OF THE INVESTMENT COMPANY 

ACT OF 1940, MAKING FINDINGS, AND 

IMPOSING REMEDIAL SANCTIONS AND 

A CEASE-AND-DESIST ORDER 

 

 

 

I. 

 

The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 

public interest that public administrative and cease-and-desist proceedings be, and hereby are, 

instituted pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 

(“Advisers Act”), and Sections 9(b) and 9(f) of the Investment Company Act of 1940 

(“Investment Company Act”) against Macquarie Investment Management Business Trust 

(“MIMBT” or “Respondent”).    

 

II. 

 

In anticipation of the institution of these proceedings, MIMBT has submitted an Offer of 

Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the purpose 

of these proceedings and any other proceedings brought by or on behalf of the Commission, or to 

which the Commission is a party, and without admitting or denying the findings herein, except as 

to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are 

admitted, Respondent consents to the entry of this Order Instituting Administrative and Cease-and-

Desist Proceedings Pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 



2 

 

1940, and Sections 9(b) and 9(f) of the Investment Company Act of 1940, Making Findings, and 

Imposing Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below.  

 

III. 

 

On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 

Summary  

1. These proceedings involve MIMBT’s Absolute Return Mortgage-Backed Securities 

strategy (the “Strategy”), a fixed income investment strategy primarily invested in U.S. agency 

mortgage-backed securities (“MBS”), treasury futures, and agency collateralized mortgage 

obligations (“CMOs”).  From January 2017 through April 2021 (the “Relevant Period”), MIMBT 

served as the adviser or sub-adviser to twenty advisory clients with exposure to some or all of the 

Strategy’s investments, including eleven U.S.-registered investment companies, each a retail 

mutual fund (“RICs”), and nine unregistered investment vehicles (the “Unregistered Investment 

Vehicles”), including four private investment funds, each a pooled investment vehicle as defined in 

Rule 206(4)-8 under the Advisers Act (“Unregistered Pooled Investment Vehicle”) (collectively, 

the “Strategy Accounts”).    

 

2. During the Relevant Period, MIMBT was responsible for pricing all Strategy-related 

investments and used those prices for its daily client performance reporting.  MIMBT engaged an 

independent third-party pricing service (“Pricing Vendor”) to provide evaluated marks for all 

Strategy-related securities.  The Pricing Vendor’s disclosures stated that its bid-side evaluations 

represented its expectation of what the holder would receive in an orderly transaction for an 

institutional round lot position under current market conditions (“Pricing Vendor Marks”).  While 

there is no standard definition regarding what constitutes an odd lot or a round lot, for purposes of 

the findings in this Order, MIMBT evaluated an institutional round lot for the Relevant CMO 

positions as having at least $1 million current value.  The Pricing Vendor specifically disclosed that 

it did not provide separate evaluations for odd lot positions.       

 

3. The misconduct at issue involves interest only and inverse interest only (collectively 

“IO”) and last cash flow (“LCF”) bonds (collectively, the “Relevant CMOs”).  During the Relevant 

Period, MIMBT caused the Strategy Accounts to purchase approximately 4900 Relevant CMO 

positions, 90% of which were largely illiquid, odd lot positions (i.e., small-sized positions).  Odd lot 

positions in the Relevant CMOs typically traded at a significant discount to round lot positions (i.e., 

institutional, larger-sized positions) of the same bonds.   

 

4. During the Relevant Period, MIMBT and the RICs used round lot Pricing Vendor 

Marks to value the odd lot Relevant CMO positions.  MIMBT did not have a reasonable basis to 

believe that the Pricing Vendor Marks accurately reflected the price the Strategy Accounts could 

 
1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other person 

or entity in this or any other proceeding. 

 



3 

 

reasonably expect to receive for the odd lot Relevant CMO positions in a current market sale.  As a 

result, thousands of Relevant CMO positions were marked at inflated prices.  MIMBT’s 

overvaluation of odd lot Relevant CMO positions resulted in MIMBT reporting overstated 

valuations and performance to the Unregistered Investment Vehicles and at certain times during the 

Relevant Period, overstating the RICs’ net asset value (“NAV”). 

 

5. MIMBT’s marketing materials stated that “liquidity” was a key advantage of the 

Strategy; however, most of the odd lot Relevant CMO positions held in the Strategy Accounts were 

largely illiquid and could not be sold in the open market at the round lot Pricing Vendor Marks.  In 

order to satisfy redemption requests from certain investors in one Unregistered Pooled Investment 

Vehicle during mid-2018, MIMBT executed numerous internal cross trades of Relevant CMO 

positions with the RICs over the course of two trading days to avoid or minimize losses to that 

selling Unregistered Pooled Investment Vehicle (the “2018 Internal Cross Trades”).  MIMBT also 

arranged for dealer-interposed cross trades to satisfy redemption requests from investors in certain 

Unregistered Pooled Investment Vehicles in which MIMBT temporarily sold odd lot Relevant 

CMO positions to third-party broker-dealers and then repurchased those same positions for 

allocation to one or more Strategy Accounts.   

 

6. By arranging these internal and dealer-interposed trades, MIMBT was able to 

execute the trades at prices that often deviated from current market prices.  As a result, certain 

Strategy Accounts (primarily the RICs) absorbed the trading losses that otherwise would                                                                                                

have been borne by the redeeming Unregistered Pooled Investment Vehicles.  MIMBT’s execution 

of the cross trades created undisclosed conflicts of interest and benefitted certain MIMBT advisory 

clients over others, in breach of MIMBT’s fiduciary duty of loyalty and duty of care under the 

Advisers Act.  Cross transactions involving the RICs also violated certain of the affiliated 

transactions prohibitions of the Investment Company Act. 

 

7. As a result of the conduct described above, certain of MIMBT’s marketing 

materials, due diligence questionnaires, performance reports, monthly commentary to investors, 

reports to the relevant RIC Boards of Trustees (“RIC Boards”), and Forms N-CSR filed with the 

Commission during the Relevant Period contained materially false and misleading statements and 

omissions about performance, liquidity, asset valuation, and cross trading involving the Strategy 

Accounts and related investments.    

 

8.    During the Relevant Period, MIMBT’s compliance department had responsibility 

for the implementation of its own compliance policies and procedures applicable to the Strategy 

Accounts (“MIMBT Compliance Policies”) as well as the implementation of the RIC compliance 

policies and procedures, as adopted and approved by the RIC Boards (“RIC Compliance Policies”) 

(collectively, the “Compliance Policies”).  MIMBT failed to implement the MIMBT Compliance 

Policies applicable to the Strategy Accounts relating to conflicts of interest, pricing, and cross trades 

and failed to implement the RIC Compliance Policies relating to the pricing of portfolio securities 

and cross trades. 

 

 



4 

 

                                                           Respondent 

 

9. Macquarie Investment Management Business Trust (“MIMBT”) is a Delaware 

statutory trust with its principal place of business in Philadelphia, Pennsylvania.  It is an indirect 

wholly owned subsidiary of Macquarie Group Limited, an Australian global financial services 

company, whose common stock trades on the Australian Securities Exchange (Ticker: MQG).  

During the Relevant Period, the statutory trust consisted of six series, including, among others, the 

Delaware Management Company series that provided investment advisory services to over 80 

U.S.-registered investment companies, and the Macquarie Investment Management Adviser series, 

that provided investment advisory services to, among others, institutional clients, separately 

managed accounts, and pooled investment vehicles domiciled in the U.S. and abroad.  MIMBT is 

an investment adviser registered with the Commission since May 31, 1988.  According to its most 

recent Form ADV filed with the Commission on June 28, 2024, MIMBT has approximately $191 

billion in regulatory assets under management.   

 

Background 

 

10. In 2007, MIMBT’s predecessor developed the Strategy and launched the first 

private fund to invest in Strategy investments and also created the related Absolute Return 

Mortgage-Backed Securities Composite (“Composite”), which tracked the Strategy’s annual 

performance.  In 2008, MIMBT acquired that initial fund and took over management of the 

Strategy and the Composite.  The Strategy’s core portfolio included fixed income securities, 

namely, MBS, treasury futures, and agency CMOs.  The Relevant CMO portion of the Strategy 

was a combination of IO tranches, representing the interest portion of the mortgage-backed security, 

and LCF tranches, representing the last tranche of the CMO to receive principal payment.  No new 

investor capital was invested in the Strategy after February 2019.  MIMBT discontinued the 

Strategy in April 2021, after the SEC commenced its investigation.    

 

11. During the Relevant Period, six Strategy Accounts were fully invested in Strategy 

investments and fourteen Strategy Accounts had a partial allocation to investments related to the 

Strategy.  During the Relevant Period, each RIC held less than 7% of its total investments in 

Relevant CMOs.  The Strategy was managed by a portfolio management team in MIMBT’s fixed 

income department.  This team was responsible for investment selection and trading decisions for 

each Strategy Account’s allocation to Strategy investments. 

 

12. During the Relevant Period, MIMBT substantially increased its marketing of the 

Strategy worldwide and steadily increased the allocation of Relevant CMOs to Strategy Accounts.  

According to Strategy monthly reports provided to investors, the assets under management 

(“AUM”) of Strategy Accounts fully invested in the Strategy increased from $13 million at the end 

of 2015, to over $1 billion at its peak in May 2018.  MIMBT marketing materials and investor 

correspondence reported that the Strategy’s total allocation to CMOs (including, but not limited to, 

the Relevant CMOs) reached approximately 75% in 2018.  Strategy Accounts with partial 

exposure to Strategy investments held approximately $1.1 billion in Relevant CMO positions as of 

May 2018.   



5 

 

13. During the Relevant Period, MIMBT earned over $7 million in advisory fees for 

managing the Strategy Accounts and related investments. 

 

Overvaluation of the Relevant CMOs 

 

14. The Compliance Policies relating to portfolio pricing directed that all debt 

securities, including CMOs, be priced on the basis of valuations provided by the Pricing Vendor.  

MIMBT’s Compliance Policies utilized the same valuation method as contained in the RIC 

Compliance Policies.  The Pricing Vendor’s disclosures stated that its published evaluated prices 

represented a good faith estimate of the price the holder of the security could reasonably expect to 

receive in an orderly transaction for a round lot position under current market conditions and did 

not provide separate valuations for odd lot positions.  According to the Compliance Policies, if 

valuations are not available from the Pricing Vendor, “then quotations will be obtained from 

brokers/dealers and valued at the mean between the bid and the offer if available, then the bid if 

available or the last available price when appropriate; otherwise fair value will be determined.”  

When market quotations are not available, the determinations of “fair value” will be made by the 

“Pricing Committee” and included criteria and pricing methodologies for the Pricing Committee to 

consider when determining fair value.  The Pricing Committee was responsible for the oversight of 

pricing for all Strategy Accounts.   

 

15. During the Relevant Period, odd lot positions of the Relevant CMOs generally 

traded at a significant discount to round lots of the same bonds.  MIMBT purchased the Relevant 

CMOs in both round lot and odd lot positions and then allocated a pro rata share to each 

participating Strategy Account.  When MIMBT purchased an odd lot position at a current market 

price and allocated it to the Strategy Accounts, the position was priced at the Pricing Vendor Mark 

intended for round lots, resulting in an immediate performance gain.  Even when MIMBT 

purchased Relevant CMOs for the Strategy Accounts in round lot positions, its practice of 

allocating round lots across multiple accounts typically resulted in Strategy Accounts holding 

Relevant CMOs in odd lot positions, which were then priced at the Pricing Vendor Mark intended 

for round lots.      

 

16. Trading records reflect over 3900 purchases of IO positions in Strategy Accounts 

during the Relevant Period.  Approximately 90% of these IOs were odd lot positions, and 

approximately 64% of those IO positions had a value under $100,000.  Trading records reflect 

approximately 1000 purchases of LCF positions in Strategy Accounts during the Relevant Period, 

and approximately 90% of these were odd lot positions.  All of these odd lot positions were 

improperly priced at Pricing Vendor Marks intended for round lots, which positively impacted the 

daily performance that MIMBT reported to the Unregistered Investment Vehicles and at certain 

times during the Relevant Period overstated the NAV of the RICs by at least $0.01 per share.  

MIMBT’s internal performance attribution reports, created for select Strategy Accounts, show that 

the positive performance in 2017 and 2018 was primarily attributed to the Relevant CMOs (and 

IOs, in particular).   

 



6 

 

17. In August 2018, MIMBT convened the Pricing Committee to address the pricing 

variance between Pricing Vendor Marks and market prices for odd lot Relevant CMOs.  The 

Pricing Committee directed the Strategy’s portfolio management team to conduct an analysis of the 

trading discount for odd lot Relevant CMO positions and to determine odd lot exposure across the 

Strategy Accounts.  

 

18. The Strategy’s portfolio management team prepared an internal pricing analysis for 

the Pricing Committee, which estimated that odd lot positions traded at discounts to Pricing 

Vendor Marks ranging from 3% to 28%, with the discount proportionally higher as the lot size 

decreased.  Among other things, the Pricing Committee considered and discussed the implications 

of a prior enforcement action that involved odd lot overvaluation and discussed options for valuing 

the Strategy’s odd lot CMO holdings, including to fair value the positions.  Ultimately, in 

September 2018, the Pricing Committee concluded that it was appropriate to continue utilizing the 

Pricing Vendor Marks with no adjustment based on trade lot size, reasoning that it was “industry 

practice” to do so.    

 

19. MIMBT did not implement the applicable pricing procedures contained in the 

Compliance Policies.  MIMBT improperly priced odd lot Relevant CMOs at Pricing Vendor 

Marks that were intended only for round lot positions.  Even though odd lot valuations were not 

available from the Pricing Vendor, MIMBT did not obtain market quotations from broker-dealers 

or take steps to fair value the odd lot Relevant CMO positions, as required by the Compliance 

Policies.  As a result, thousands of Relevant CMO positions held in Strategy Accounts were marked 

at inflated prices.  MIMBT’s overvaluation of odd lot Relevant CMO positions resulted in MIMBT 

reporting overstated performance to the Unregistered Investment Vehicles, and the RICs overstating 

NAV.  

 

Unlawful Cross Trading to Satisfy Redemptions 

 

20. Strategy marketing materials provided to certain Strategy Accounts stated that the 

Strategy focused on preservation of capital and risk management and that liquidity was a “key 

advantage and important distinguishing feature.”  In response to certain due diligence 

questionnaires from prospective clients regarding the liquidity of the Strategy, MIMBT stated that 

“100% of securities can be liquidated within 1-3 days, within 5% of current prices.”  However, 

during the Relevant Period, MIMBT typically could not sell the largely illiquid odd lot Relevant 

CMO positions at the round lot Pricing Vendor Marks.   

 

21. When certain investors in the Unregistered Pooled Investment Vehicles made 

redemption requests during 2017 and 2018, MIMBT partially funded the requests by cross trading 

odd lot Relevant CMO positions held in the redeeming account with other Strategy Accounts 

(primarily the RICs). During the Relevant Period, MIMBT engaged in approximately 465 internal 

cross trades and 175 dealer-interposed cross trades involving the Relevant CMOs.  These cross 

trades were not executed at a current market price.  MIMBT’s execution of the trades created 

undisclosed conflicts of interest and benefitted certain MIMBT advisory clients over others, in 



7 

 

breach of its fiduciary duty under the Advisers Act.  Cross trades involving the RICs also violated 

certain of the affiliated transactions prohibitions of the Investment Company Act.   

 

 

22. Cross trades can benefit clients because the practice enables a portfolio manager to 

move securities among client accounts without having to expose the security to the market thereby 

saving transaction and market costs that would otherwise be paid to executing broker-dealers.  

Conversely, these transactions can also pose substantial risks to clients due to the inherent conflict 

of interest for the adviser, which has a duty of loyalty and duty of care to seek best execution for 

each client.  

 

23. With respect to cross trades involving the RICs, Sections 17(a)(1) and 17(a)(2) of 

the Investment Company Act generally prohibit any affiliated person of a RIC or any affiliated 

person of the affiliated person, acting as principal, from knowingly selling a security to or 

purchasing a security from the RIC unless the person first obtains an exemptive order from the 

Commission under Section 17(b).  Rule 17a-7 under the Investment Company Act exempts from 

these prohibitions certain cross trades where the affiliation between a RIC and its trading 

counterparty arises solely because the two have a common investment adviser, or investment 

advisers that are affiliated persons of each other, common directors, or officers, provided that the 

cross trades are effected in accordance with Rule 17a-7.  Rule 17a-7 requires, among other things, 

that cross trades be executed at the “independent current market price,” which is defined in 

relevant part as “the average of the highest current independent bid and lowest current independent 

offer determined on the basis of reasonable inquiry.”  If a brokerage commission, fee, or other 

remuneration is paid in connection with the cross trade, the cross trade is not eligible for an 

exemption under Rule 17a-7 and is therefore, impermissible. 

 

24. Section 48(a) of the Investment Company Act prohibits “any person, directly or 

indirectly, to cause to be done any act or thing through or by means of any other person which it 

would be unlawful for such person to do” under the Investment Company Act or the rules 

thereunder.  The Commission has stated that interpositioning a dealer in cross trades does not 

remove the cross trades from the prohibitions of Section 17(a).  See Exemption of Certain 

Purchase or Sale Transactions Between a Registered Investment Company and Certain Affiliated 

Persons Thereof, Investment Company Act Release No. 11136, 1980 WL 29973, at *2 n.10 (Apr. 

21, 1980).   

 

25. During the Relevant Period, the Compliance Policies were designed to ensure that 

cross trades involving the RICs were executed in compliance with Rule 17a-7 under the Investment 

Company Act.  Included among the Compliance Policies was an internal desktop procedure 

outlining the steps required for the Compliance Department to review and approve all cross trades 

(the “Cross Trade Approval Policy”).  The Cross Trade Approval Policy permitted cross trades only 

if certain conditions were met.  Among other things, the Cross Trade Approval Policy required 

MIMBT compliance personnel to confirm that:  (i) the securities involved were not illiquid; (ii) the 

quantity of shares being traded was equal between client accounts; (iii) the cross trades were 

between RICs, and no separately managed accounts were involved; (iv) the cross trades would 



8 

 

benefit every client account involved; (v) the Portfolio Manager for all accounts involved approved 

the cross trade; and (vi) the transaction was effected at the independent current market price of the 

security.  The Compliance Policies did not specifically address dealer-interposed cross trades.   

 

Prohibited Dealer-Interposed Cross Trades 

 

26. Trading records reflect that during the Relevant Period, MIMBT engaged in more 

than 175 dealer-interposed cross trades of odd lot Relevant CMOs in order to partially satisfy 

pending redemption requests from certain investors in Unregistered Pooled Investment Vehicles.  

MIMBT temporarily sold odd lot positions to a third-party broker-dealer and then repurchased the 

same position from that broker-dealer for one or more Strategy Accounts at a markup.  The trades 

were not executed at a current market price.  By executing these trades, MIMBT was able to 

provide the redeeming Unregistered Pooled Investment Vehicles liquidity in a largely illiquid 

market and minimized trading losses for the redeeming clients. 

 

27. For example, in March 2017, an investor in one Unregistered Pooled Investment 

Vehicle with approximately $20 million invested in Strategy-related investments requested a $8.4 

million redemption.  To partially satisfy the redemption request, MIMBT temporarily sold 

approximately 60 odd lot IO positions to a third-party broker-dealer at the Pricing Vendor Mark 

and repurchased those same securities, from the same broker-dealer at the Pricing Vendor Mark 

(plus a small markup) for two of the RICs.  The cross trading benefitted the redeeming 

Unregistered Pooled Investment Vehicle, which sold the odd lot positions at prices higher than the 

independent current market price, but disadvantaged the two RICs which purchased the odd lot 

positions at prices higher than the independent current market price.  MIMBT then improperly 

priced the odd lot positions purchased by these RICs at the round lot Pricing Vendor Marks.   

 

28. From June through August 2018, investors in two other Unregistered Pooled 

Investment Vehicles made a series of redemption requests, leading to the eventual full liquidation 

of both Unregistered Pooled Investment Vehicles.  These Unregistered Pooled Investment Vehicles 

collectively held approximately 425 odd lot Relevant CMO positions that could not be sold at 

Pricing Vendor Marks.  MIMBT temporarily sold approximately 100 of the odd lot Relevant CMO 

positions to certain third-party broker-dealers and repurchased those same securities from the same 

broker-dealers for certain other Strategy Accounts.  The trades were not executed at a current 

market price, and the repurchases all included a markup.  The cross trading benefitted the 

redeeming Unregistered Pooled Investment Vehicles, which sold the odd lot positions at prices 

higher than a current market price, but disadvantaged the purchasing Strategy Accounts, which 

purchased the odd lot positions at prices higher than a current market price.  MIMBT then 

improperly valued the odd lot positions purchased for the Strategy Accounts at the round lot 

Pricing Vendor Marks (i.e., above their fair value).  MIMBT’s execution of the trades created 

undisclosed conflicts of interest and benefitted certain MIMBT advisory clients over others, in 

breach of its fiduciary duty under the Advisers Act.  Cross trades involving the RICs also violated 

certain of the affiliated transactions prohibitions of the Investment Company Act.   

 



9 

 

29. MIMBT’s compliance systems and controls did not detect the unlawful dealer- 

interposed cross trading, even though the trades involved the same thinly-traded bond being sold 

and repurchased through the same broker-dealer, in the same odd lot size, and involved MIMBT 

accounts on both sides of the transaction.   

 

Prohibited Internal Cross Trades 

 

30. After MIMBT effected the series of dealer-interposed cross trades as identified 

above, the two redeeming Unregistered Pooled Investment Vehicles still held odd lot Relevant 

CMOs that needed to be sold to satisfy remaining investor redemption requests.  The Strategy 

portfolio management team informed the MIMBT distribution and compliance departments that 

the pricing discounts for the remaining odd lot IO securities could be as much as 40% to 50% 

below the Pricing Vendor Marks.  MIMBT personnel discussed in an email the possibility of 

internally cross trading the securities to other Strategy Accounts as an option to “benefit the 

redeeming investor.”  

 

31. On July 30, 2018, MIMBT directed the sale of 134 IO positions from one of the 

redeeming Unregistered Pooled Investment Vehicles.  The sales were effected through 

approximately 450 internal cross trades between that Unregistered Pooled Investment Vehicle and 

the RICs.  Each cross trade involved an odd lot IO position, and nearly 80% of the cross trades 

involved IO positions valued at less than $100,000.  All cross trades were executed above 

independent current market prices.  These internal cross trades resulted in the RICs absorbing 

losses that otherwise would have been borne by the redeeming Unregistered Pooled Investment 

Vehicles in a market sale.  MIMBT’s compliance department approved these internal cross 

transactions.  However, the compliance department did not verify that “the Portfolio Manager (or 

designee) for all accounts involved had approved the trade,” as required by the Cross Trade 

Approval Policy.  

 

32. On August 27, 2018, MIMBT directed the sale of two additional IO positions from 

the same redeeming Unregistered Pooled Investment Vehicle.  The sales were effected through 15 

internal cross trades with seven RICs.  These internal cross trades similarly resulted in the RICs 

absorbing losses that otherwise would have been borne by the redeeming Unregistered Pooled 

Investment Vehicle in a market sale.  MIMBT’s compliance department approved the 15 internal 

cross trades.  However, the compliance department did not verify that the relevant portfolio 

managers for all RICs involved had approved the trades.  In total, more than 95% of the Relevant 

CMO sales from this redeeming Unregistered Pooled Investment Vehicle were effected through 

unlawful cross transactions.    

 

33. Also in August 2018, MIMBT directed a series of internal cross trades of odd lot IO 

positions between the second redeeming Unregistered Pooled Investment Vehicle and two RICs.  

However, the day before the scheduled cross trades, the portfolio manager for the purchasing RICs 

learned about the proposed trades.  He notified the Strategy portfolio management team and the 

MIMBT compliance department that he had not authorized any cross trades into the RICs he 

managed.  As a result, the cross trades were canceled.   



10 

 

34. MIMBT’s execution of the dealer-interposed and internal cross trades at prices 

other than a current market price created undisclosed conflicts of interest and benefitted certain 

MIMBT advisory clients over others, in breach of MIMBT’s fiduciary duty of loyalty and duty of 

care under the Advisers Act.    

 

35. Additionally, none of the dealer-interposed or internal cross trades described above 

involving the RICs complied with Rule 17a-7 under the Investment Company Act or the applicable 

Compliance Policies.  MIMBT did not seek an exemptive order for the cross transactions, and the 

transactions were not exempt from the prohibition by virtue of Rule 17a-7 because the trades were 

not executed at current independent market prices, and the dealer-interposed cross trades were 

made through one or more broker-dealers who received remuneration in connection with the 

transaction.  Moreover, MIMBT did not ensure that the cross trades complied with internal 

Compliance Policies.  For example, compliance personnel failed to confirm that no separately 

managed accounts were involved in the trades, that the odd lot positions in the cross trades were 

not illiquid securities, and that the cross trades benefitted every account involved.  In fact, the cross 

trades resulted in the RICs purchasing largely illiquid securities from certain Unregistered Pooled 

Investment Vehicles and absorbing losses that otherwise would have been borne by those 

Unregistered Pooled Investment Vehicles.  Moreover, compliance personnel did not verify that the 

portfolio manager for all accounts involved approved each cross trade.   

 

Undisclosed Odd Lot Repositioning Plan  

 

36. In September 2018, following the cross trades described above, concerns relating to 

the valuation of the Relevant CMOs and related liquidity risks to Strategy Accounts, potential 

conflicts of interest, and the adequacy of Strategy disclosures were elevated to MIMBT’s risk 

team, which subsequently prepared a memorandum to update the MIMBT Executive Committee.  

Although MIMBT implemented certain changes to address the concerns, including discontinuing 

purchasing odd lot positions, MIMBT did not implement policies and procedures to fair value 

existing odd lot positions or disclose to investors the liquidity risks the existing odd lot positions 

had on Strategy Accounts.   

 

37. After the scheduled cross trades involving the second redeeming Unregistered 

Pooled Investment Vehicle were canceled, more than half of the Relevant CMO positions 

remained in that account.  Throughout September and October 2018, MIMBT sold more than 80 of 

the remaining odd lot positions by aggregating them with identical positions held in certain other 

Strategy Accounts to create a round lot or larger odd lot position.  These positions were ultimately 

sold in the open market at a loss from Pricing Vendor Marks, but the losses were reduced by 

aggregating the positions with those held in other Strategy Accounts.  Several Strategy Account 

investors asked MIMBT about the reasons these positions were sold at a loss relative to the Pricing 

Vendor Marks.  MIMBT did not disclose the known overvaluation of odd lot positions but instead 

blamed the losses solely on market conditions.   

 

38. In March 2019, MIMBT replaced a co-portfolio manager of the Strategy.  After this 

change, one of the Unregistered Investment Vehicles lost two buy ratings and began experiencing a 



11 

 

significant increase in redemption requests.  At that time, approximately one-third of that fund’s 

portfolio was comprised of odd lot Relevant CMO positions.  MIMBT management was concerned 

about the fund’s liquidity if redemptions continued, estimating that the odd lot positions may have 

to be sold at a 12% discount from Pricing Vendor Marks, materially impacting the Unregistered 

Investment Vehicle’s performance.  MIMBT ultimately approved a plan to rebalance the Strategy 

Accounts by aggregating identical odd lot Relevant CMO positions held by the Strategy Accounts 

and then selling the positions in the open market in two stages, first for one week commencing 

April 15, 2019, followed by another round of sales for the week commencing May 13, 2019.     

 

39. Strategy Accounts were not given any prior notice of the planned sales, and the 

trading had a negative impact on portfolio performance of the Strategy Accounts.  One Strategy 

Account questioned MIMBT about the losses resulting from the sales.  MIMBT management 

instructed personnel not to communicate proactively with the Strategy Accounts about the sales but 

instead to use the standard monthly commentary (“Monthly Reports”) as the primary method of 

informing clients.  However, the Monthly Reports did not include complete and accurate 

information about the extent of Relevant CMO odd lot positions held in the portfolios, MIMBT’s 

inability to sell these positions at the Pricing Vendor Marks, or the repositioning of the odd lot 

holdings.        

   

40.  MIMBT discontinued the Strategy in April 2021.   

 

False and Misleading Disclosures  

 

Marketing Materials and Performance Reports 

 

41. Throughout the Relevant Period, MIMBT made materially false and misleading 

statements regarding performance, liquidity, and valuation of investments related to Strategy 

Accounts in certain marketing materials and performance reports.   

 

42. Strategy marketing materials provided to actual and prospective clients included 

Strategy quarterly updates and responses to due diligence questionnaires and requests for 

information.  Throughout the Relevant Period, marketing materials stated that liquidity was a “key 

advantage and important distinguishing feature” of the Strategy and described Strategy investments 

as “highly liquid.”  For example, in response to certain due diligence questionnaires from 

prospective clients and investors regarding the liquidity of the Strategy, MIMBT stated that “100% 

of securities can be liquidated within 1-3 days, within 5% of current prices.”  However, for the 

reasons described above, Relevant CMOs were largely illiquid and could not be sold at the Pricing 

Vendor Marks.  No marketing materials disclosed that odd lots of the Relevant CMOs were being 

valued at higher, round lot prices or that the securities were generally illiquid.     

 

43. Throughout the Relevant Period, MIMBT disseminated to Strategy Accounts 

Monthly Reports for the Strategy and related investments.  The Monthly Reports included 

overstated performance returns for the Strategy that were calculated using improper valuations for 

the Relevant CMOs.  None of the Monthly Reports disclosed the overvaluation of the Relevant 



12 

 

CMOs, the liquidity risks inherent in those positions, the unlawful cross trading, or the planned 

repositioning in 2018 to sell existing odd lot holdings.     

 

Annual Reports Filed with the Commission 

    

44. Throughout the Relevant Period, MIMBT made materially false and misleading 

statements regarding valuation of client assets and the source of fund performance in annual 

reports filed with the Commission on Forms N-CSR that it prepared for the RICs (“Annual 

Reports”). 

 

45. For example, the Annual Report for one RIC for the period ended March 31, 2017, 

noted in the “Portfolio Management Review” section that investments in Relevant CMOs 

outperformed two relevant benchmarks and contributed to the fund’s positive performance.  The 

Annual Reports for one RIC for the period ended July 31, 2017, two RICs for the period ended 

October 31, 2017, and one RIC for the period ended December 31, 2017, similarly noted that 

Relevant CMOs contributed to positive performance.  However, none of the Annual Reports 

disclosed that Relevant CMOs were overvalued and had not been priced in accordance with RIC 

Compliance Policies.   

 

46. MIMBT’s subsequent reduction of Relevant CMO positions in Strategy Accounts 

following the 2018 Internal Cross Trades negatively impacted the performance of the RICs.  Each 

of the Annual Reports filed after the 2018 Internal Cross Trades disclosed underperformance 

during the period, however, these reports materially misstated MIMBT’s rationale for selling the 

Relevant CMOs and the resulting losses.  For example, the Annual Report for one RIC for the 

period ended March 31, 2019, noted that the fund had reduced its Relevant CMO allocation during 

the “second half of 2018 and . . . the first quarter of 2019”, and Relevant CMO returns were “quite 

negative” and a “large drag on performance.”  However, the report omitted any disclosure about 

the performance impact resulting from the overvaluation and illiquidity of those positions.  

Moreover, that report failed to disclose the RICs’ purchases of Relevant CMOs at above-market 

prices through cross trades during the same period.  Similarly, Annual Reports for two RICs for the 

period ended October 31, 2018, disclosed that the funds had begun to unwind investments in 

Relevant CMOs in late 2018 because they “were no longer attractive in a more volatile 

environment” but omitted any disclosure about the illiquidity and overvaluation of the positions.  

 

47. None of the relevant Annual Reports disclosed the unlawful cross trading between 

the RICs and other Strategy Accounts occurring throughout 2018, and the resulting impact of the 

RICs absorbing losses that would otherwise have been borne by redeeming Strategy Accounts.     

 

Reports to the RIC Boards 

 

48. During the Relevant Period, the RIC Compliance Policies required that all trades 

effected pursuant to Rule 17a-7 under the Investment Company Act be identified and reported to 

the relevant RIC Boards on a quarterly basis.  In October 2018, MIMBT’s compliance department 

provided its quarterly compliance reports (“Quarterly RIC Reports”) to the RIC Boards, which 



13 

 

included information summarizing cross trades that occurred between July and September 2018 

(“Quarter”).  The Quarterly RIC Reports misrepresented that all cross trades executed during the 

Quarter were conducted in accordance with Rule 17a-7 under the Investment Company Act and the 

RIC Compliance Policies.  Specifically, the Quarterly RIC Reports misrepresented that each cross 

trade was effected at the independent current market price of the security, was consistent with the 

policy of each fund participating in the transactions and effected without any brokerage 

commission.  One Quarterly RIC Report indicated that the cross trades during the Quarter resulted 

from excess cash and the portfolio manager’s belief that the securities purchased were desirable for 

the fund.  Another Quarterly RIC Report stated that the portfolio manager was looking to increase 

the fund’s position in the identified security, and that the “17a-7 purchases were preferable to 

buying the security in the market.”   

 

49. The Quarterly RIC Reports did not disclose that hundreds of the internal cross 

trades were effected with Unregistered Pooled Investment Vehicles in order to satisfy those 

vehicles’ redemption requests and involved odd lot Relevant CMO positions that could not be sold 

in the open market at Pricing Vendor Marks.  Moreover, the Quarterly RIC Reports failed to report 

any dealer-interposed cross trades.   

 

Compliance Deficiencies 

 

50. Rule 38a-1 under the Investment Company Act requires each registered investment 

company to adopt and implement written policies and procedures reasonably designed to prevent 

violations of the federal securities laws.  Section 206(4)-7 promulgated under Section 206(4) of the 

Advisers Act requires that registered investment advisers adopt and implement written policies and 

procedures reasonably designed to prevent violations of the Advisers Act and the rules thereunder.   

 

51. During the Relevant Period, the RIC Compliance Policies included written policies 

and procedures relating to pricing of portfolio securities and cross trades.  However, during the 

Relevant Period, as described above, MIMBT caused the RICs to fail to implement the funds’ 

pricing and cross trading policies and procedures that were designed to ensure, among things, that 

(i) the pricing of portfolio securities was accurate; and (ii) cross trades were disclosed to the Board 

of Trustees and complied with Rule 17a-7 under the Investment Company Act.  

 

52.  During the Relevant Period, the MIMBT Compliance Policies included written 

policies and procedures relating to MIMBT’s fiduciary duty to provide disinterested advice and 

disclose any material conflicts of interest to its clients.  During the Relevant Period, as described 

above, MIMBT failed to implement these policies and procedures by favoring certain advisory 

clients when directing and executing cross trades and failing to comply with the Cross Trade 

Approval Policy. 

 

53. In October 2023, MIMBT retained a compliance consultant (“Compliance 

Consultant”) to, among other things, perform a comprehensive review of its policies and 

procedures.  MIMBT has taken steps to enhance its policies, procedures, controls, and training 

regarding, among other things, valuation, cross trading, conflicts of interest and disclosures.  In 



14 

 

addition, MIMBT hired a new chief compliance officer and a senior securities valuation specialist 

and is adding additional compliance staff.  MIMBT has also implemented a new automated trade 

surveillance system.   

 

Violations 

 

54. As a result of the conduct described above related to the 2018 Internal Cross 

Trades, MIMBT willfully violated Section 206(1) of the Advisers Act, which makes it unlawful for 

an investment adviser to employ any device, scheme or artifice to defraud any client or prospective 

client.  Scienter is required to establish a violation of Section 206(1) of the Advisers Act.  SEC v. 

Steadman, 967 F.2d 636, 641-42 (D.C. Cir. 1992). 

 

55. As a result of the conduct described above, MIMBT willfully violated Section 

206(2) of the Advisers Act, which prohibits investment advisers from “engag[ing] in any 

transaction, practice, or course of business which operates as a fraud or deceit upon any client or 

prospective client.”  Scienter is not required to establish a violation of Section 206(2) of the 

Advisers Act, which may rest on a finding of negligence.  Id. at 643 n.5. 

 

56. As a result of the conduct described above, MIMBT willfully violated Section 

206(4) of the Advisers Act and Rule 206(4)-7 thereunder, which require investment advisers to 

adopt and implement written policies and procedures reasonably designed to prevent violations of 

the Advisers Act and the Rules thereunder.  A violation of Section 206(4) and the rules thereunder 

does not require scienter and may rest on a finding of simple negligence.  Id. at 647.  

 

57. As a result of the conduct described above, MIMBT willfully violated Section 

206(4) of the Advisers Act and Rule 206(4)-8 thereunder, which make it unlawful for any 

investment adviser to a pooled investment vehicle to make any untrue statement of material fact or 

omit to state a material fact necessary to make the statements made, in light of the circumstances 

under which they were made, not misleading, to any investor or prospective investor in the pooled 

investment vehicle, or otherwise engage in any act, practice, or course of business that is 

fraudulent, deceptive, or manipulative with respect to any investor or prospective investor in the 

pooled investment vehicle.  A violation of Section 206(4) and the rules thereunder does not require 

scienter and may rest on a finding of simple negligence.  Id. at 647.   

  

58. As a result of the conduct described above, MIMBT caused the RICs to violate 

Sections 17(a)(1) and 17(a)(2) of the Investment Company Act, which make it unlawful for any 

affiliated person or promoter of or principal underwriter for a RIC or any affiliated person of such a 

person, promoter, or principal underwriter, acting as principal (1) knowingly to sell any security or 

other property to such RIC or to any company controlled by such RIC, or (2) knowingly to 

purchase from such RIC, or from any company controlled by such RIC, any security or other 

property, unless the transaction complies with the exemptive requirements of Rule 17a-7 under the 

Investment Company Act, or the adviser obtains an exemptive order under 17(b) of the Investment 

Company Act.  MIMBT did not seek an exemptive order for the cross transactions MIMBT 

effected, and the transactions were not exempt from the prohibition by virtue of Rule 17a-7 



15 

 

because the dealer-interposed trades were made through one or more broker-dealers who received 

remuneration in connection with the transaction.  Moreover, the transactions were not executed at a 

price equal to the average of the highest current independent bid to purchase that security and the 

lowest current independent offer to sell that security, determined on the basis of reasonable inquiry.   

 

59. Section 34(b) of the Investment Company Act makes it unlawful for any person to 

make any untrue statement of material fact in any registration statement, application, report, 

account, record, or other document filed with the Commission under the Investment Company Act, 

or the keeping of which is required pursuant to Section 31(a) of the Investment Company Act, or to 

omit from any such document any fact necessary in order to prevent the statements made therein 

from being materially misleading.  As a result of the conduct described above, MIMBT willfully 

violated Section 34(b) of the Investment Company Act.  Establishing a violation of Section 34(b) 

of the Investment Company Act does not require proof of scienter.  See In the Matter of 

Fundamental Portfolio Advisors, Inc., Advisers Act Rel. No. 2146, 2003 WL 21658248, at *8 

(July 15, 2003) (Commission Opinion). 

 

60. As a result of the conduct described above, MIMBT caused the RICs to violate 

Rule 22c-1 under the Investment Company Act which prohibits registered investment companies, 

among others, from the sale, redemption, or repurchase of the investment company’s redeemable 

securities except at a price based on the current net asset value of such security.   

 

61. As a result of the conduct described above, MIMBT caused the RICs to violate 

Rule 38a-1 under the Investment Company Act, which requires a registered investment company 

to adopt and implement written policies and procedures reasonably designed to prevent violations 

of the federal securities laws.   

 

Disgorgement and Prejudgment Interest 

 

62. The disgorgement and prejudgment interest ordered in Section IV.C are consistent 

with equitable principles, do not exceed Respondent’s net profits from its violations, and will be 

distributed to harmed investors, if feasible.  The Commission will hold funds paid pursuant to 

Section IV.C in an account at the United States Treasury pending a decision whether the 

Commission in its discretion will seek to distribute funds.  If a distribution is determined feasible 

and the Commission makes a distribution, upon approval of the distribution final accounting by the 

Commission, any amounts remaining that are infeasible to return to investors, and any amounts 

returned to the Commission in the future that are infeasible to return to investors, may be 

transferred to the general fund of the U.S. Treasury subject to Section 21F(g)(3) of the Exchange 

Act.   

 

Undertakings 

 

63. Effective upon entry of this Order, MIMBT undertakes to continue to retain the 

services of the Compliance Consultant, exclusively bearing all costs, including compensation and 

expenses, associated with the retention of the Compliance Consultant.   



16 

 

64. MIMBT shall cooperate fully with the Compliance Consultant and shall provide the 

Compliance Consultant with access to its files, books, records, and personnel as reasonably 

requested by the Compliance Consultant.  For the period of the engagement, MIMBT: (1) shall not 

have the authority to terminate the Compliance Consultant or substitute another compliance 

consultant for the Compliance Consultant without the prior written approval of the Commission 

staff; and (2) shall compensate the Compliance Consultant and persons engaged to assist the 

Compliance Consultant for services rendered pursuant to this Order at their reasonable and 

customary rates. 

 

65. MIMBT shall require the Compliance Consultant to conduct a comprehensive 

review of the effectiveness and implementation of MIMBT’s compliance policies and procedures, 

relating to: (1) valuation of Relevant CMOs and associated liquidity risks; (2) cross trading; and (3) 

advisory conflicts of interest and disclosures with respect to (1) and (2) above (collectively, the 

“Policies and Procedures”).  MIMBT shall require the Compliance Consultant to provide MIMBT 

with any recommendations for changes or improvements to the effectiveness and implementation 

of the Policies and Procedures as the Compliance Consultant deems appropriate. 

 

66. The Compliance Consultant shall review MIMBT’s Policies and Procedures for a 

period of two years and generate, during that period, an initial report (“Initial Report”) in February 

2025 assessing the extent to which the Policies and Procedures comply with the Investment 

Company Act, the Advisers Act, and regulations promulgated thereunder, and making specific 

recommendations for improvements to the Policies and Procedures.  The Initial Report shall 

include a description of the review performed, the names of the individuals who performed the 

review, the conclusions reached, and the Compliance Consultant’s recommendations for changes 

in or improvements to MIMBT’s Policies and Procedures. 

 

67. The Compliance Consultant shall also generate a final report (“Final Report”) 

(together with the Initial Report, the “Reports”) twenty-four months after its initial engagement.  

The Compliance Consultant will conduct a review of the adoption and implementation of its 

recommendations and confirm that they have been fully implemented.  The Final Report will 

include a description of how MIMBT has adopted and implemented the recommendations and 

provide a final assessment as to whether the Policies and Procedures are reasonably designed to 

prevent violations of the federal securities laws.  MIMBT shall provide a copy of each of the 

Reports to the Commission.  

 

68. MIMBT shall adopt all recommendations contained in the Initial Report within 

forty-five (45) days of the date of the report; provided, however, that within thirty (30) days after 

the date of the report, MIMBT shall in writing advise the Compliance Consultant and the 

Commission staff of any recommendations that MIMBT considers to be unduly burdensome, 

impractical, or inappropriate.  With respect to any recommendation that MIMBT considers to be 

unduly burdensome, impractical, or inappropriate, MIMBT need not adopt that recommendation at 

that time but shall propose in writing an alternative policy, procedure, or system designed to 

achieve the same objective or purpose. 



17 

 

69. As to any recommendation on which MIMBT and the Compliance Consultant do not 

agree, MIMBT shall attempt in good faith to reach an agreement with the Compliance Consultant 

on an alternative proposal within sixty (60) days after the submission of the Initial Report. Within 

fifteen (15) days after the conclusion of the discussion and evaluation by MIMBT and the 

Compliance Consultant, MIMBT shall require that the Compliance Consultant inform MIMBT and 

the Commission staff in writing of the Compliance Consultant’s final determination concerning any 

recommendation to which MIMBT has objected.  MIMBT shall abide by the determinations of the 

Compliance Consultant.  Within thirty (30) days after the final agreement between MIMBT and the 

Compliance Consultant or final determination of the Compliance Consultant, whichever occurs 

first, MIMBT shall adopt and implement all of the recommendations that the Compliance 

Consultant deems appropriate. 

 

70. For good cause shown and upon timely application of MIMBT, the Commission 

staff may extend any of the procedural dates relating to the undertakings.  Deadlines for procedural 

dates shall be counted in calendar days, except that if the last day falls on a weekend or federal 

holiday, the next business day shall be considered to be the last day.  

 

71. For the period of engagement and for a period of two years from completion of the 

engagement,  MIMBT undertakes not to (i) retain the Compliance Consultant for any other 

professional services outside of the services described in this Order; (ii) enter into any other 

professional relationship with the Compliance Consultant, including any employment, consultant, 

attorney-client, auditing or other professional relationship; or (iii) enter, without prior written 

consent of the Commission staff, into any such professional relationship with any of the 

Compliance Consultant’s present or former affiliates, employers, directors, officers, employees, or 

agents acting in their capacity as such.  

 

72. The Reports and related written communications of the Compliance Consultant will 

likely include confidential financial, proprietary, competitive business or commercial information.  

Public disclosure of a Report could discourage cooperation, impede pending or potential 

government investigations or undermine the objectives of the reporting requirement.  For these 

reasons, among others, Reports and the contents thereof are intended to remain and shall remain 

non-public, except (1) pursuant to court order, (2) as agreed to by the parties in writing, (3) to the 

extent that the Commission determines in its sole discretion that disclosure would be in furtherance 

of the Commission’s discharge of its duties and responsibilities, or (4) as otherwise required by 

law.  

 

73. MIMBT shall preserve, for a period of not fewer than six (6) years from the end of 

the fiscal year last used, the first two (2) years in an easily accessible place, any record of 

compliance with these undertakings.  

 

74. MIMBT shall certify, in writing, compliance with the undertakings set forth above.  

The certification shall identify the undertakings, provide written evidence of compliance in the 

form of a narrative, and be supported by exhibits sufficient to demonstrate compliance.  The 

Commission staff may make reasonable requests for further evidence of compliance, and 



18 

 

Respondent agrees to provide such evidence.  The certification and supporting material shall be 

submitted to Glenn S. Gordon, Associate Regional Director, Securities and Exchange Commission, 

801 Brickell Avenue, Suite 1950, Miami, FL 33131, with a copy to the Office of the Chief Counsel 

of the Enforcement Division, no later than sixty (60) days from the date of completion of the 

undertakings.  

 

75. MIMBT shall cooperate fully with the Commission in any and all investigations, 

litigations or other proceedings relating to or arising from the matters described in the Order.  In 

connection with such cooperation, MIMBT shall: (i) produce, without service of a notice or 

subpoena, any and all non-privileged documents and other information requested by the 

Commission staff subject to any restrictions under the law of any foreign jurisdiction; (ii) use its 

best efforts to cause their officers, employees, and directors to be interviewed by the Commission 

staff at such time as the staff reasonably may direct; and (iii) use its best efforts to cause their 

officers, employees, and directors to appear and testify without service of a notice or subpoena in 

such investigations, depositions, hearings or trials as may be requested by the Commission staff.  

In determining whether to accept the Offer, the Commission has considered this undertaking. 

 

IV. 

 

In view of the foregoing, the Commission deems it appropriate and in the public interest to 

impose the sanctions agreed to in Respondent MIMBT’s Offer. 

 

Accordingly, pursuant to Sections 203(e) and 203(k) of the Advisers Act, and Sections 9(b) 

and 9(f) of the Investment Company Act, it is hereby ORDERED that: 

 

A. Respondent MIMBT cease and desist from committing or causing any violations 

and any future violations of Sections 206(1), 206(2), and206(4) of the Advisers Act and Rules 

206(4)-7 and 206(4)-8 thereunder, and Sections 17(a)(1) and (a)(2) and 34(b) of the Investment 

Company Act and Rules 22c-1 and 38a-1 thereunder. 

 

B. Respondent MIMBT is censured. 

 

C. Respondent MIMBT shall within 10 days of the entry of this Order, pay 

disgorgement of $7,633,671 and prejudgment interest of $2,197,535 to the Securities and 

Exchange Commission.  The Commission will hold funds paid pursuant to this paragraph in an 

account at the United States Treasury pending a decision whether the Commission, in its 

discretion, will seek to distribute funds or, transfer them to the general fund of the United States 

Treasury, subject to Section 21F(g)(3).  If timely payment is not made, additional interest shall 

accrue pursuant to SEC Rule of Practice 600. 

 

D. Respondent MIMBT shall, within 10 days of the entry of this Order, pay a civil 

money penalty in the amount of $70,000,000 to the Securities and Exchange Commission.  The 

Commission may distribute civil money penalties collected in this proceeding if, in its discretion, 

the Commission orders the establishment of a Fair Fund pursuant to 15 U.S.C. § 7246, Section 



19 

 

308(a) of the Sarbanes-Oxley Act of 2002.  The Commission will hold funds paid pursuant to this 

paragraph in an account at the United States Treasury pending a decision whether the Commission, 

in its discretion, will seek to distribute funds or, subject to Exchange Act Section 21F(g)(3), 

transfer them to the general fund of the United States Treasury.  If timely payment is not made, 

additional interest shall accrue pursuant to 31 U.S.C. § 3717.   

 

Payment must be made in one of the following ways: 

 

(1) Respondent may transmit payment electronically to the Commission, which will provide 

detailed ACH transfer/Fedwire instructions upon request; 

 

(2) Respondent may make direct payment from a bank account via Pay.gov through the SEC 

website at http://www.sec.gov/about/offices/ofm.htm; or 

 

(3) Respondent may pay by certified check, bank cashier’s check, or United States postal 

money order, made payable to the Securities and Exchange Commission and hand-

delivered or mailed to: 

 

Enterprise Services Center  

Accounts Receivable Branch  

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169     

 

Payments by check or money order must be accompanied by a cover letter identifying 

MIMBT as a Respondent in these proceedings, and the file number of these proceedings; a copy of 

the cover letter and check or money order must be sent to Glenn S. Gordon, Associate Regional 

Director, Division of Enforcement, Securities and Exchange Commission, 801 Brickell Avenue 

Suite 1950, Miami, FL 33131. 

 

E. Regardless of whether the Commission in its discretion orders the creation of a Fair 

Fund for the penalties ordered in this proceeding, amounts ordered to be paid as civil money 

penalties pursuant to this Order shall be treated as penalties paid to the government for all 

purposes, including all tax purposes.  To preserve the deterrent effect of the civil penalty, 

Respondent agrees that in any Related Investor Action, it shall not argue that it is entitled to, nor 

shall it benefit by, offset or reduction of any award of compensatory damages by the amount of any 

part of Respondent’s payment of a civil penalty in this action (“Penalty Offset”).  If the court in 

any Related Investor Action grants such a Penalty Offset, Respondent agrees that it shall, within 30 

days after entry of a final order granting the Penalty Offset, notify the counsel in this action and 

pay the amount of the Penalty Offset to the Securities and Exchange Commission.  Such a payment 

shall not be deemed an additional civil penalty and shall not be deemed to change the amount of 

the civil penalty imposed in this proceeding.  For purposes of this paragraph, a “Related Investor  

http://www.sec.gov/about/offices/ofm.htm


20 

 

Action” means a private damages action brought against Respondent by or on behalf of one or 

more investors based on substantially the same facts as alleged in the Order instituted by the 

Commission in this proceeding. 

 

F. Respondent MIMBT shall comply with the undertakings enumerated in paragraphs 

63 to 74.   

 

 By the Commission. 

 

 

 

Vanessa A. Countryman 

Secretary