When an advisory firm employee uses material non-public information (MNPI) from a client to increase his own profits, that most likely constitutes insider trading. A former healthcare analyst at a New York City-based registered advisory firm found this out the hard way on January 10, when he settled insider trading charges with the SEC.
In a move likely to be at least partially welcomed by advocates of private funds and those that advise them, the SEC on September 18 proposed to widen the definition of who qualifies as an “accredited investor.” Under the proposed new definition, while wealth would continue as a factor, professional knowledge, experience or certifications would also count.
Regulators take improper valuation and mispricing seriously, particularly when the party accused of doing so also allegedly tried to hide his actions. An advisory firm and commodity pool operator portfolio manager found this out the hard way after reaching settlements with both the SEC and the CFTC that together left him almost $850,000 poorer and […]
Hedge funds or private equity funds organized and offered by banking entities and affiliated advisers in certain foreign countries may not, under current law, be allowed to share the same name or even a variation of the same name with that bank or adviser. This may cause a problem, because countries like China or Taiwan have local regulations that may require the use of the same name. Some in the industry are asking for relief to deal with this issue.
Its one thing for an adviser to express an opinion about a company that it plans to invest in. Its another to use false statements in an attempt to drive down a companys share price. The SEC recently filed a complaint in federal court that a hedge fund adviser did just that.
Sometimes personal efforts to make things right dont entirely work. A case in point might be when a managing member of a hedge fund advisory firm personally recapitalizes a fund after it is all but wiped out - and is then fined by the SEC anyway.
It may sound like a way to bring in investor dollars, but in reality it is more likely to bring in SEC investigators. Hedge fund advisers tempted to lure new investors and keep existing ones by taking questionable steps to increase fund value run the risk of being taken to court by the SEC for fraud.
A chief financial officer at a hedge fund advisory firm on May 8 settled SEC charges that he failed to act on red flags involving asset mismarking and insider trading. The firm ended up paying more than $10 million, and the CFO agreed to separately pay a $100,000 fine. The lesson: Advisory firm executives need to be on the lookout for signs of fraud, and act on them when they find them.
Misrepresentation is misrepresentation, but sometime misrepresentation can go so far that a federal court has to step in and put a stop to the alleged activity until the charges are resolved. That is the situation that a purported hedge fund manager found itself in earlier this month.