The SEC has commenced an enforcement proceeding against the portfolio manager of a mutual fund for failing to inform the Valuation Committee of certain events that affected the valuation of an underlying security.  As a result, the SEC charges that the fund overstated its NAV, which allowed the fund’s adviser to receive inflated advisory fees.  The SEC alleges that the portfolio manager was informed by the trustee for the underlying security (a CDO in subprime mortgages) that an event of default occurred and that, as a result of acceleration declared by senior security-holders, the fund would not receive future coupon payments.  The respondent failed to inform her firm’s Valuation Committee even though the firm’s policies and procedures required portfolio managers to review all prices on a daily basis and notify the Valuation Committee of prices not representing fair value.  Once the Valuation Committee became aware of the valuation impairment, it wrote down the security, which led to a run on the fund and its ultimate liquidation.  The SEC alleges direct violations of the Adviser Act’s anti-fraud rules as well as aiding and abetting.