New York (HedgeCo.Net) – One of the founders of New York hedge fund firm Vicis Capital is under fire by the SEC for engineering an undisclosed transaction in which he had a financial conflict of interest. Without admitting or denying the charges, Stastney agreed to pay more than $2.9 million to settle the SEC’s charges.
The SEC alleges that Stastney traded as a principal when he authorized the client hedge fund to pay approximately $7.5m to purchase a basket of illiquid securities from a personal friend and outside business partner hired by the firm as a managing director.
“Fund advisers cannot sit on both sides of a transaction as buyer and seller without the consent of the clients who rely on them for unbiased investment advice,” said Julie M. Riewe, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. “Stastney failed to live up to his fiduciary duty when he unilaterally set the terms of the transaction and authorized it without disclosing that he would personally profit from it.”
On top of the $2.9 million fine, the SEC’s order bars the Marlboro, NJ hedge fund adviser from association with any investment company, investment adviser, broker, dealer, municipal securities dealer, or transfer agent for at least 18 months. Stastney will be permitted to finish winding down the fund under the oversight of an independent monitor payable at his own expense.
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