When investors place their money with a professional asset manager, they expect one thing above all else: that the value of their investments is being reported fairly. That expectation sits at the heart of the U.S. Securities and Exchange Commission’s case against Macquarie Investment Management Business Trust, a subsidiary within Macquarie Asset Management. According to the regulator, that trust was broken over several years through inflated valuations, misleading disclosures and trading practices that disadvantaged some clients while benefiting others. The result was one of the largest SEC settlements involving an investment adviser in 2024, costing the firm nearly $80 million and raising uncomfortable questions about internal controls at one of the world’s largest asset managers.
The case did not involve a market crash, a rogue trader or a spectacular investment blow-up. Instead, it centered on something less visible but equally important: how difficult-to-price mortgage securities were valued inside an investment strategy that managed hundreds of millions of dollars. According to the SEC, those valuations painted a picture of portfolio performance that was more optimistic than reality, allowing clients and the market to receive inaccurate information over an extended period.
The investment adviser at the center of the case, Macquarie Investment Management Business Trust, managed what it called the Absolute Return Mortgage-Backed Securities Strategy, commonly known as ARMBS. The strategy invested primarily in mortgage-backed securities and collateralized mortgage obligations, or CMOs. Many of those securities were “odd lots,” meaning they were smaller positions that generally traded at discounts compared with larger institutional blocks. Determining a fair market value for these securities required careful judgment because they were not actively traded every day.
According to the SEC’s findings, the problem emerged because the adviser relied on pricing data intended for larger institutional positions while applying those same prices to thousands of smaller securities. The regulator concluded there was no reasonable basis for believing these odd-lot securities could actually be sold at those values. As a result, approximately 4,900 mortgage securities were carried at inflated prices between January 2017 and April 2021, overstating the value and reported performance of client accounts invested in the strategy.
The valuation issue did not remain confined to accounting records. According to the SEC, inflated prices created another problem when investors wanted to redeem their money. Selling the securities into the open market would have exposed their true value and forced losses to be recognized. Instead, the SEC found that the adviser arranged hundreds of dealer-interposed and internal cross trades that transferred the securities between affiliated client accounts at prices that did not reflect prevailing market values. Around 640 such trades were identified by the regulator. The practical effect, according to the SEC, was that losses were shifted rather than recognized immediately, leaving some retail mutual funds holding overvalued securities while other investors avoided the full impact of redemption losses.
Regulators viewed that conduct as a breach of an investment adviser’s fiduciary obligations. Investment advisers are legally required to act in the best interests of every client and to treat investors fairly. The SEC concluded that Macquarie Investment Management Business Trust failed not only in valuing assets accurately but also in maintaining adequate policies governing conflicts of interest, valuation procedures and cross trades between advisory clients. It further found that certain disclosures concerning valuation practices, liquidity, performance reporting and trading activity contained misleading statements or omitted important information that investors should have received.
The SEC’s enforcement order charged the adviser with violating multiple provisions of the Investment Advisers Act of 1940. Rather than contesting the allegations in court, the firm chose to settle. Under the agreement announced in September 2024, Macquarie Investment Management Business Trust agreed to pay approximately $79.8 million, consisting of a $70 million civil penalty together with roughly $9.8 million in disgorgement and prejudgment interest. As is common in SEC settlements, the company neither admitted nor denied the regulator’s findings while consenting to the order.
Macquarie Asset Management described the matter as a legacy issue connected to a strategy that had already been discontinued. The company said affected clients would be remediated and emphasized that the conduct identified by the SEC was not consistent with its standards. It also stated that it had implemented and continued to implement additional remedial measures designed to strengthen governance, improve valuation oversight and reinforce its risk culture. The firm stressed that serving clients remained its priority and that it intended to address the deficiencies identified during the investigation.
While the SEC’s findings focused on the adviser itself, the public settlement did not charge individual executives or portfolio managers. No criminal charges accompanied the enforcement action, and no admissions of wrongdoing were made by the company. The case therefore stands as a significant civil regulatory action rather than a criminal prosecution. That distinction is important because settlements of this type resolve alleged violations without requiring the regulator to prove its case at trial or the company to admit liability.
The enforcement action nevertheless attracted considerable attention within the investment management industry because it underscored a recurring regulatory concern: valuation of illiquid assets. Unlike publicly traded stocks, securities that rarely change hands can be difficult to price. Investment managers often rely on third-party pricing services, but regulators have consistently maintained that outsourcing price estimates does not eliminate an adviser’s responsibility to ensure those values accurately reflect market reality. In announcing the settlement, SEC officials emphasized precisely that point, warning that fiduciaries cannot avoid accountability simply because external pricing vendors are involved.
The case also highlights the risks associated with cross trading between client accounts. While such transactions can be lawful under specific circumstances, they are heavily regulated because they present obvious conflicts of interest. When one client buys securities from another client managed by the same adviser, determining a fair price becomes critical. According to the SEC, those safeguards failed in this instance because transactions occurred at values that did not represent current market prices, creating winners and losers among clients depending on which side of the trade they occupied.
The matter did not end with the settlement announcement. In 2025, the SEC listed the enforcement action as a covered action under its whistleblower program, allowing eligible individuals who may have provided original information leading to the enforcement outcome to submit claims for potential awards. The notice did not identify any whistleblower or confirm that an award had been granted, but it signaled that the case met the statutory requirements for potential whistleblower compensation.
The SEC action also arrived during a period of increased regulatory scrutiny for parts of the broader Macquarie group. Although unrelated to the U.S. mortgage securities matter, Australian regulators separately pursued enforcement actions involving market controls and operational compliance during 2024, reinforcing the pressure on the institution to strengthen governance across different business lines. Those cases involved different entities, different facts and different regulators, but together they contributed to heightened attention on the group’s compliance framework.
For investors, the Macquarie settlement is a reminder that valuation practices can have consequences just as serious as outright investment losses. Accurate pricing determines everything from reported returns to investor redemptions and fund performance rankings. When valuations become distorted, even without dramatic market events, confidence in financial reporting can quickly erode. Regulators continue to send a clear message that investment advisers bear ultimate responsibility for ensuring asset values are fair, disclosures are complete and every client is treated equitably. The nearly $80 million settlement demonstrates that failures in those basic obligations can carry substantial financial, legal and reputational costs long after the underlying investment strategy has disappeared.
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