Santa Barbara-Based Hedge Fund Advisers Charged With Misconduct

downloadNew York (HedgeCo.Net) -California hedge fund adviser Alpha Titans LLC and two executives have been involved in improper allocations of fund assets to pay undisclosed operating expenses, the SEC said. Also charged was an accountant who conducted the outside audit of misleading financial statements that the firm sent to investors.

The SEC said: Timothy P. McCormack, and general counsel Kelly D. Kaeser used assets of two affiliated private funds to pay more than $450,000 in office rent, employee salaries and benefits, and similar expenses without clear authorization from fund clients and without accurate and complete disclosures that fund assets were being used for these purposes. The firm’s outside auditor Simon Lesser was aware of how Alpha Titans used fund assets but still gave his final approval of audit reports containing unqualified opinions that the funds’ financial statements were presented fairly.

The firm, both executives, and the auditor agreed to settle the SEC’s charges.

“Alpha Titans did not make the proper disclosures for clients to decipher that the funds were footing the bill for many of the firm’s operational expenses,” said Marshall S. Sprung, Co-Chief of the SEC Enforcement Division’s Asset Management Unit.  “Private fund managers must be fully transparent about the type and magnitude of expenses they allocate to the funds.”

McCormack and Kaeser will pay $469,522, and a penalty of $200,000.  Each agreed to be barred from the securities industry for one year, and Kaeser agreed to a one-year suspension from practicing as an attorney on behalf of any entity regulated by the SEC.  Lesser agreed to pay a penalty of $75,000 and consented to an order suspending him from practicing as an accountant on behalf of any entity regulated by the SEC for at least three years.

Alex Akesson
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