The SEC recently announced charges against an investment adviser, Premium Point Investments LP, and accused the adviser of engaging in intentional fraud - you can read the SEC's litigation release and find its Complaint containing the charges here. The SEC alleges that the fund's manager and a number of employees and partners colluded to inflate the value of funds beyond their true value, all in order to exaggerate returns, retain investors and hide poor fund performance.
This alleged activity went beyond mere negligence. The SEC claims that three of the named defendants, the adviser's CEO/ Chief Investment Officer, Portfolio Manager and a former Partner, worked out a secret arrangement with a broker-dealer whereby the broker-dealer gave inflated quotes for mortgage-backed securities - in return, the defendants at Premium Point sent trades to the broker-dealer.
Even If You Think Your firm is Compliant, Review With an Outside Regulatory Counsel Can Help
It's much more common to see firms that are negligent and do not pay proper attention to their compliance programs than firms that engage in outright fraud. Even given the high risks of neglecting compliance, we see plenty of advisers that only review compliance matters once a year (or less often), and to only really look closely when an SEC examination is looming.
While it's important to be proactive and prepare for an SEC exam, and certainly there's no better time than before the SEC notifies an adviser of an upcoming inspection to ensure your compliance policies and procedures are where they should be, firms can take steps now ensure proper policies and procedures are in place and being followed.
That's why we recommend working with an outside regulatory counsel, even when you believe your policies and procedures are adequate. Often, we will find omissions and/or problems when reviewing policies and procedures for the first time, and are able to recommend proactive steps designed to enhance compliance efforts before your next exam.
Learn More About Private Equity and Hedge Fund Counsel
From registering with the SEC, performing due diligence, developing marketing collateral, testing compliance programs and guiding you through an SEC examination, contact Jacko Law Group can help your private equity or hedge fund manage any potential compliance issue well before it becomes a problem for the firm.
Robert Conca has over 19 years of experience advising businesses and financial professionals. He has acted both in legal counsel and senior executive capacities for companies spanning all stages of development. From start-ups to ...
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