/SEC Charges Hedge Fund Adviser with Deceiving Investors by Inflating Fund Performance

SEC Charges Hedge Fund Adviser with Deceiving Investors by Inflating Fund Performance

WHAT HAPPENED?

On May 9th, 2018, the Securities and Exchange Commission (SEC) announced its charges against a registered investment adviser with “inflating the value of private funds it advised by hundreds of millions of dollars.”

The scheme allegedly occurred from at least September 2015, through March 2016, and involved a clandestine arrangement in which the adviser sent trades to a broker-dealer in exchange for an inflated valuation on mortgage-backed securities (MBS).  The firm also allegedly further inflated valuation by using “imputed” mid-point valuations, increasing the value of MBS holdings and inflating returns.

The SEC believes that the defendants overstated the funds’ value to cover up poor fund performance and to acquire and retain investors.

WHAT DOES THIS MEAN FOR ME?

The charged investment adviser allegedly failed to report its true performance and, as a result, “denied investors the opportunity to make informed investment decisions.”  The SEC complaint seeks permanent injunctions, the return of allegedly fraudulent gains plus interest, and civil penalties.

For more information about how this case relates to you or your firm, please reach out to Fairview directly.

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Fairview
Founded in 2005 with the goal of developing streamlined back office solutions for investment advisers. Fairview is now servicing investment advisers, foundations and funds with over $185 billion in collective assets.