The Securities and Exchange Commission is reportedly looking into a series of bond trades by three insurance companies who used an algorithm by Guggenheim Partners.
The SEC is probing trades recommended by Strategy 11, a Guggenheim-developed algorithm that helps insurers select corporate bonds, according to a MarketWatch report. The companies being scrutinized are Guggenheim Life & Annuity Co., Delaware Life Insurance Co. – which is controlled by Guggenheim CEO Mark Walter – and EquiTrust Life Insurance Co., a company majority-owned by retired basketball star Earvin “Magic” Johnson. At one point, the insurer used the algorithm’s recommendations to invest nearly $13 billion.
According to MarketWatch, SEC’s review of the data has found that more than half of the bond trades recommended by Strat 11 were trades between the three insurers themselves. Several Guggenheim executives raised concerns about the so-called cross-trades in August of 2017 and ordered a freeze on them, MarketWatch reported.
Eventually, at least one of the concerned executives told the SEC that some of the trades appeared to have been made at inflated prices.
