November 2, 2017
SEC Charges Unregistered Fund Manager
On October 26, 2017, the SEC charged an unregistered investment adviser and its principals (“collectively, the “Respondents”) with engaging a private fund it managed (the “Fund”) in conflicted transactions without providing disclosure to the investors. The conflicted transactions that Respondents performed includes the following:
In addition to causing numerous conflicted transactions, the Respondent engaged in a variety of other fraudulent activities, including:
Respondent’s engagement in the above activities were in direct violation of Sections 206(1), 206(2) and 206(4) of the Advisers Act. Accordingly, Respondents were ordered to pay disgorgement of $685,514.73, prejudgment interest of $42,791.38 and a civil money penalty of $275,000.
WHAT DOES THIS MEAN FOR ME?
The SEC’s charges against Respondents reiterates the applicability of antifraud provisions for investment advisers, whether they are registered or not. Advisers should have an effective compliance program that can ensure the adviser abides by these antifraud provisions. Furthermore, written policies and procedures should be implemented that review all business operations and guarantee the adviser follows the terms of any governing documents, including PPMs, LPAs and subscription agreements. If you have any questions or concerns about this enforcement action, please contact Fairview®.