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Mutual Fund Manager Fined and Barred from Industry for Investment, Disclosure, and Fee Violations

A fund manager was barred from the industry and ordered to pay $550,000 for multiple breaches of fiduciary duty including failure to observe the fund’s investment limitations.  According to the SEC, the respondent did not comply with the fund’s investment concentration policies, including the fund’s status as “diversified,” as described in the Registration Statement and as disclosed to the fund’s Board of Directors.   The SEC also accuses the respondent, the sole proprietor of the fund manager, with double-charging separate account clients invested in the fund.  Additionally, the SEC charges that the respondent cherry-picked trades for his personal benefit to the detriment of clients.  The SEC cites violations of the anti-fraud provisions of the Exchange Act, the Advisers Act, and the Investment Company Act.

OUR TAKE: Registered funds are highly-regulated investment vehicles that require strict adherence to the Investment Company Act, SEC rules, the Registration Statement, and the Board of Directors.  Advisers have much less flexibility with respect to disclosure and fees than separate accounts or private funds.

https://www.sec.gov/litigation/admin/2017/33-10367.pdf

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