The SEC banned Barry Ziskin from the securities industry for failing to follow the investment objectives of a stock mutual fund managed by his firm, which ultimately lead to the fund’s liquidation in December 2010. Respondent Ziskin is the founder, president and sole control person of TFM, a New York corporation based in Mesa, Arizona. According to the SEC’s investigation, TFM managed the Z Seven Fund, Inc. or (“ZSF”), a mutual fund whose prospectus described it as a stock fund seeking long-term capital appreciation.
According to the SEC’s Order Instituting Administrative and Cease-and-Resist Proceedings, beginning in September 2009, ZSF invested in put options for speculative purposes contrary to the fund’s stated investment policy. TFM and Ziskin misled investors by misrepresenting in a shareholder report that the options trading was for hedging purposes. Over the course of fifteen months, Ziskin’s strategy caused $3.7 million in losses. By deviating from ZSF’s fundamental investment policy, Respondents breached their fiduciary duty to ZSF.
The SEC said, “Mutual fund advisers who deviate from their funds investment strategy and keep investors in the dark will be held accountable for their fraudulent actions.” Given Respondents’ financial condition and additional evidence, it was determined that TFM and Ziskin are unable to pay a civil penalty.