## Facts

- Ronald V. Speaker worked for Janus Capital Corporation and served as an executive vice president and the portfolio manager of a registered mutual fund advised by Janus (the fund).
- As portfolio manager, Speaker was responsible for making investment decisions for the fund, including whether to accept or reject specific trade opportunities presented by broker-dealers.
- A broker-dealer sales representative contacted Speaker and offered the fund the chance to purchase a company’s debentures at a stated price.
- Speaker declined the offer on the fund’s behalf.
- Later the same day, Speaker learned there was a higher bid for the same debentures, creating an opportunity to buy the debentures at the earlier price and quickly resell them at a profit.
- Instead of presenting the opportunity back to the fund or reconsidering the trade for the fund, Speaker purchased approximately $10 million (face amount) of the debentures for his personal account.
- Speaker sold the debentures the same day and made a personal profit of about $16,000.
- Speaker did not disclose to the fund that he intended to take the opportunity personally, and he did not obtain the fund’s consent or waiver before trading.
- The Securities and Exchange Commission instituted an administrative proceeding against Speaker based on this conduct, alleging violations of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and the Securities Exchange Act of 1934.

## Issues

1. Whether a mutual fund portfolio manager violates federal securities laws by declining an investment opportunity for the fund and then taking the same opportunity for personal profit without full disclosure to, and consent from, the fund.
2. What remedial relief and sanctions are appropriate for that misconduct in an SEC administrative proceeding.

## Decision

- The SEC concluded that Speaker’s conduct—taking for himself a profitable trading opportunity that had been presented to the fund—was improper self-dealing inconsistent with his fiduciary obligations as a portfolio manager.
- The SEC determined that the nondisclosed appropriation of the opportunity and the resulting personal profit supported findings of violations under the Investment Advisers Act of 1940, the Investment Company Act of 1940, and the Securities Exchange Act of 1934.
- The SEC entered an order providing remedial relief and sanctions against Speaker in connection with those violations.

## Legal Principles

- A portfolio manager to a mutual fund owes fiduciary duties that require acting for the fund’s benefit and not placing personal interests ahead of the fund’s interests in selecting and executing trades.
- When an investment opportunity is presented to a fund through the fund’s portfolio manager, the manager may not secretly take that opportunity for personal gain after rejecting it for the fund.
- Full and fair disclosure of a conflict, plus the fund’s informed consent (typically through appropriate fund governance), is required before a portfolio manager can personally participate in a conflicted transaction tied to the fund’s trading opportunity.
- Personal trading by advisory personnel that competes with, displaces, or diverts a fund’s trading opportunity can constitute fraudulent or deceptive conduct under federal securities laws, even where the manager’s profit is relatively small compared to the transaction size.

## Conclusion

In the Matter of Ronald V. Speaker holds that a mutual fund portfolio manager may not reject a trade opportunity for the fund and then take the same opportunity for his own account without disclosure and the fund’s consent; the SEC found such self-dealing violated federal securities laws and warranted remedial sanctions in an administrative order.


In the Matter of Ronald V. Speaker, Investment Company Act Release No. 22461 (1997)