No harm, no foul? That's one of the arguments F-Squared Investments' ex-chief's lawyers are making in his defense.

InvestmentNews and RIABiz report that yesterday seven attorneys (six from Williams & Connolly in Washington, D.C. and one from Foley & Lardner in Boston) filed Present's response to the SEC's complaint.

Present left Wellesley, Massachusetts-based ETF strategist F-Squared in November, and in December F-Squared settled (to the tune of $35 million) with the SEC over accusations that F-Squared inflated its flagship AlphaSector indexes' performance and claimed it was all actual (when in fact the first seven years of performance were backtested). Yet Present didn't settle, and now he's calling for a jury trial, with a scheduling conference slated for April 16.

Present's attorneys' new filing paints a picture of Present as acting "in good faith" and being unaware of the performance claims problems.

"Mr. Present denies knowing that the composite performance of AlphaSector compiled by F-Squared was based on 'backtested' information," the filing reads. "Any alleged misrepresentations or allegedly false or misleading statements or omissions ... were inadvertent and unintentional."

The attorneys also claim that "Mr. Present's alleged conduct did not cause loss or harm to anyone," pushing back against the SEC's request to get disgorged gains and a civil penalty out of Present. The filing also describes Present as relying on bad advice "of others, including but not limited to legal and compliance professionals, upon which Mr. Present was entitled to rely." The filing doesn't identify who (at F-Squared or elsewhere) gave this advice to Present. 

Edited by: Neil Anderson, Managing Editor


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