The former Chief Financial Officer of a now-defunct hedge fund was fined and barred from the industry for authorizing improper inter-fund transfers and other financial improprieties. The SEC alleged that the CFO authorized the ongoing transfers of funds from an affiliated offshore fund to facilitate the activities of a cash-strapped on-shore funds. The CFO continued the practice even after two subordinate accountants resigned after complaining that the practice did not comport with the funds’ governing documents or applicable accounting standards. The SEC accused the CFO with aiding and abetting his firm’s activities that defrauded investment advisory clients.
OUR TAKE: The SEC will seek to hold individual officers accountable for the illegal actions of the firms they manage. The SEC’s Enforcement Division has cited personal accountability as a core enforcement principle.