In re Virtus Investment Partners, Inc. Securities Litigation

Court: United States District Court, Southern District of New York
Case Number: 15-cv-1249
Judge: Hon. William H. Pauley III
Class Period: 5/28/13 - 12/22/14
Case Contacts: John C. Browne, Brenna Nelinson

This securities class action lawsuit was filed against Virtus Investment Partners, Inc. (“Virtus” or the “Company”) and certain of its executive officers and a director (the “Defendants”).  The action asserts claims under the Securities Exchange Act of 1934 on behalf of investors in Virtus securities during the period of May 28, 2013 to December 22, 2014 (the “Class Period”). 

The Complaint, filed on February 20, 2015, alleges that during the Class Period, Defendants aggressively marketed and sold five mutual funds that were managed by a sub-adviser, F-Squared Investments, Inc.  (“F-Squared”).  F-Squared developed the “AlphaSector” strategy, which purported to use a proprietary quantitative model that generated buy and sell signals that were applied to a portfolio of exchange-traded funds.  Virtus and F-Squared marketed these mutual funds based on the past performance of this strategy, claiming that from 2001 to 2008, investors realized gains which significantly exceeded the performance of the Standard & Poors Index (“S&P 500”). However, Defendants knew or recklessly disregarding that AlphaSector’s advertised performance was fabricated and was not used for real clients. 

On September 5, 2014, the Wall Street Journal reported that F-Squared had received a Wells Notice from the SEC for falsifying its AlphaSector performance record.  On this news, Virtus’s stock price declined $37 per share or 16%.  On December 22, 2014, the SEC formally charged F-Squared and its former CEO for defrauding investors and announced that F-Squared would pay $35 million in disgorgements and penalties.   On March 31, 2015, Virtus announced that it was being investigated by the SEC regarding whether it had violated securities laws and set aside a “loss contingency.”

On June 9, 2015, the Honorable William H. Pauley III of the United States District Court for the Southern District of New York appointed BLB&G client, the Arkansas Teacher Retirement System, as Lead Plaintiff and BLB&G as Co-Lead Counsel for the Class.

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