On August 11, 2017, the SEC charged a hedge fund manager with misappropriating investor money between different funds he managed. These improper allocations were used to pay for legal and administrative expenses incurred by certain hedge funds during ongoing litigation with the SEC. In the case, the SEC argued that the hedge fund manager defrauded investors by failing to disclose transfers of hedge fund assets. Due to the misappropriation of investor funds, the court has ordered that the hedge fund manager must pay a $5 million penalty in addition to $7.9 million in disgorgement and prejudgment interest.
WHAT DOES THIS MEAN FOR ME?
The SEC’s monetary penalty highlights the serious repercussions that can be imposed on firms for improperly using fund assets. Firms should ensure that all investor funds continue to be used as disclosed to investors and that policies and procedures exist to address any potential violations. Please feel free to contact Fairview with any questions or concerns that you might have about this case and how it relates to your firm.