Opinion ID: 3160896
Heading Depth: 2
Heading Rank: 1

Heading: Vice President Hopkins

Text: Hopkins worked at State Street from 1998 until 2010, when he was offered retirement as a result of the SEC proceeding. From 2006 to 2007, he was a vice president and head of North American Product Engineering. During that time, Hopkins was the senior product engineer responsible for fixed-income funds, including the LDBF. He served as a liaison between the portfolio managers and the client-facing people, which included salespeople and consultant relations people. Hopkins was one of several people that would make presentations to potential clients. He was also responsible for correcting inaccuracies in LDBF fact sheets, two-page quarterly documents made available to clients and prospective clients that showed the LDBF's strategy and performance numbers. Apart from the SEC charges, Hopkins worked in the securities industry for thirty-five years with an unblemished record. - 6 - SSgA used a standard PowerPoint presentation when presenting information about the LDBF. In 2006 and 2007, this presentation included a slide titled Typical Portfolio Exposures and Characteristics -- Limited Duration Bond Strategy (Typical Portfolio Slide). We describe the slide: Under the slide title, it read:  Exposure to non-correlated fixed income asset classes  High quality  No interest rate risk Below, it had a box containing the following table: Limited Duration Bond Fund Average quality AA Modified adjusted duration 0.09 years Yield over One Month LIBOR 50 bps Average life 2.5 years It then had a heading Breakdown by market value and contained two bar graphs. The graph on the left was titled By sector and contained the following information:  ABS: 55%  CMBS: 25%  MBS: 10%  Agency: 5%  Corporates: 0%  Cash: 5% The graph on the right was titled By quality and contained the following information:  AAA: 45%  AA: 40% - 7 -  A: 10%  BBB: 5% Importantly, the Typical Portfolio Slide portrayed percentages for both sector allocations and quality of investments. It is the sector allocations (going to diversification) which disturb the SEC. The typical sector allocation graph showed that the LDBF was 55% invested in ABS, 25% invested in commercial mortgage-backed securities (CMBS), and 10% invested in mortgage-backed securities (MBS). In 2006 and 2007, the LDBF's actual investment in ABS reached 80% to nearly 100%. One expert testified that along with Conditional Value at Risk, credit ratings are used to determine the risk of a portfolio like the LDBF. Hopkins did not update the Typical Portfolio Slide's sector breakdown from at least December 2006 through the summer of 2007. He would, however, bring notes on the actual investments when he made presentations, but he did not necessarily discuss the information in his notes if it did not come up in a question. Hopkins used the Typical Portfolio Slide at several presentations. He did not recall ever being asked a question about the LDBF's actual portfolio composition, including at the specific presentation next described. On May 10, 2007, Hopkins made a presentation to the National Jewish Medical and Research Center (NJC), which was a - 8 - client of Yanni Partners, an institutional investment consulting firm. David Hammerstein, Yanni Partners' chief strategist, who was at the meeting, testified that Hopkins presented the Typical Portfolio Slide. According to Hammerstein, Hopkins used the slide to demonstrate that the LDBF was of very high quality and diversified. It is true the Typical Portfolio Slide labeled the LDBF as high quality. The Division alleged that Hopkins violated Section 17(a), Section 10(b), and Rule 10b-5 in several ways, including by being responsible for and using fact sheets that contained false and misleading information; by misleading investors with the Typical Portfolio Slide; by failing to update a slide that stated the LDBF had reduced its exposure to the index of lower-rated securities that had contributed to the January and February 2007 underperformance; and by making or acting negligently in connection with materially misleading statements in two different letters. The ALJ found that Hopkins was not responsible for the documents at issue and that he did not make any material misrepresentations or omissions. After the Division appealed the ALJ's decision dismissing the proceeding, the Commission found that the Typical Portfolio Slide included material misrepresentations that Hopkins knew were misleading and that he made the misrepresentations in the slide, at least with regard to the May 10, 2007, presentation - 9 - to the NJC. The Commission held Hopkins liable for this presentation under Section 17(a)(1), Section 10(b), and Rule 10b- 5. See 15 U.S.C. § 77q(a)(1); 15 U.S.C. § 78j(b); 17 C.F.R. § 240.10b-5.