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Category Archives: Hedge Fund Fraud

SEC Charges Investment Adviser with Custody Rule Violations

October 29, 2014 Dear Friends, Today, the SEC announced charges against an investment adviser for violating the Custody Rule, for consistently delivering audited financials late. Pursuant to the Custody Rule, investment advisers with custody of private fund assets, must distribute audited financials to investors within 120 days of fiscal year end.  In this case, the firm delivered the audited financials […]

CFTC Grants Self-Executing No-Action Relief for CPOs

October 21, 2014 Dear Friends, The CFTC has further streamlined its Commodity Pool Operator (“CPO”) delegation process, granting self-executing, no-action relief to qualifying CPOs that delegate their CPO functions to a registered CPO. In May 2014, the CFTC required CPOs that delegate certain responsibilities to a registered CPO (e.g. GPs of limited partnerships that delegate CPO authority to a registered CPO) to submit […]

SEC’s First High Frequency Trading Manipulation Case

October 16, 2014 Dear Friends, Today, the SEC sanctioned a high frequency trading firm with fraudulent trading to manipulate closing prices, resulting in a $1 million penalty and marking the SEC’s first high frequency trading manipulation case. According to the SEC, the firm placed a large number of aggressive trades in the final two seconds of the trading day to […]

SEC Announces Enforcement Action Against Compliance Officer

Dear Friends, Yesterday, the SEC announced an enforcement action against a compliance officer for allegedly altering a trading review document.   In 2010, the SEC charged an employee with insider trading. According to the SEC, after the employee was charged with insider trading, the compliance officer altered the document to make it appear that she performed a more thorough review […]

SEC Charges Former Hedge Fund Manager

Dear Friends, Yesterday, the SEC announced charges against a former hedge fund manager for taking excess management fees from clients and using the money to remodel his home and buy a Porsche. Additionally, the SEC fined the hedge fund manager’s firm $150,000, for failing to supervise the him, even though the firm expelled him and reimbursed the hedge fund, once […]

SEC Prosecuting Via ALJ Hearings

August 5, 2014 Dear Friends, As reported by the Wall Street Journal, the SEC is increasingly prosecuting wrongdoers in hearings before administrative law judges, rather than jury trials, where the SEC has recently lost a number of cases. Please click here for the Wall Street Journal article written by Russell Ryan, a former assistant director of enforcement at the SEC. […]

SEC Announces Whistleblower Award

  Dear Friends, Yesterday, the SEC announced an award of over $400,000 for a whistleblower who reported a fraud to the SEC, after the company failed to address the issue internally. According to the SEC, the whistleblower “did everything feasible to correct the issue internally,” and provided the Commission with specific, timely and credible information, allowing for a more rapid […]

SEC Sweep on Alternative Mutual Funds Imminent

Dear Friends, The SEC will begin its sweep exams of alternative mutual funds  “this summer or fall,” said Norm Champ, Director of the SEC’s Division of Investment Management, focusing on the following areas: Liquidity: Ability to satisfy investor redemption requests in a timely manner and compliance with liquidity thresholds – no more than 15% of net assets in illiquid securities […]

SEC Charges Golf Buddies in Insider Trading Ring

July 15, 2014 Dear Friends, The SEC charged a group of golfers with trading on material non-public information (MNPI), resulting in over $500,000 in illegal profits. The golfers must return their ill-gotten gains, with interest, and pay penalties of up to three times their gains. The MNPI source belonged to the same country club as the ringleader, who fed the […]

SEC Provides Guidance on Accredited Investor Verification

Dear Friends, The SEC has issued guidance on accredited investor verification methods for managers engaging in a general solicitation.  Specifically, the SEC narrowed its list of non-exclusive safe harbor verification methods as follows: Income: (a) If tax documents reflecting the purchaser’s income for the two most recent years are not yet available, the issuer could rely on IRS forms for the two most […]