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Day: August 12, 2016

SEC and DoJ Prosecute State Adviser

handcuffs and gavel

A state-registered investment adviser and its principal face both civil and criminal charges for misleading marketing statements and misappropriation of funds in connection with marketing a new private fund.  The SEC alleges that the defendants created false hypothetical performance, lied about assets under management, and purported to have relationships with a Big 4 audit firm and large prime brokerage firms.  The SEC also alleges that the defendants misappropriated an amount less than $800,000 by over-charging the fund and using the proceeds to pay personal expenses.  The SEC notes that the defendants did return some of the money to the aggrieved investor.

OUR TAKE: Isn’t this more of a case for the state securities regulator (California) than a federal case for the SEC and the Department of Justice, especially since the amount of money alleged to have been misappropriated is less than $1 Million?  Not in today’s enforcement environment.