On December 10, Kansas-based Kornitzer Capital Management (KCM) and its CEO, John Kornitzer, were sanctioned by the SEC for “repeated failures to follow client instructions to reduce high concentrations in securities of a single company”.
According to the SEC and investor complaints, KCM, directed by John Kornitzer, invested heavily in Lions Gate Entertainment, starting in 2011.
By 2015, four KCM Collective Investment Trusts (CITs) – Retirement Equity Fund, Common Equity Fund, Common Fixed Fund, Retirement Fixed Fund – had asset concentrations from 30% to as high as 89% sunk into this one company.
As early as 2016, board members of the funds repeatedly requested that KCM reduce concentration to comply with investment policy that specifies funds hold no more than 10% of any single asset. KCM and Kornitzer failed to do so until Dec 31, 2018, nearly three years later. In the interim, Lions Gate Entertainment stock dropped sharply and the funds incurred significant losses.
Because of KCM’s failure to implement written policies and procedures reasonably designed to prevent violations of the Advisers Act, they have been charged with violation of Sections 206(2) and 206(4) of the Advisers Act and Rule 206(4)-7 thereunder. Kornitzer is sanctioned as having violated Section 206(2) of the Advisers Act and caused KCM’s violation of Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder.
Kornitzer and KCM breached their fiduciary duties to the funds, and all of the investors who bought them. If you are a client of KCM and invested in any of these four funds:
- Retirement Equity Fund
- Common Equity Fund
- Common Fixed Fund
- Retirement Fixed Fund
You may have a case against KCM to reclaim losses incurred due to their willful disregard for common-sense investor protection rules. Contact us as soon as possible to make sure you are pursuing all avenues of legal compensation.