SEC Charges Investment Adviser in Connection with $105 Million Securities Fraud


ACA Performance Services

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Compliance Alert


  • Performance

On Tuesday, August 27, 2019, the U.S. Securities and Exchange Commission ("SEC") announced it had brought charges against an investment adviser in connection with a $105 million securities fraud in Pennsylvania. The complaint filed in federal court claimed the adviser solicited more than $105 million from high-net-worth investors and promised performance returns of 30% to hedge fund investors. The adviser also claimed to never have had a losing month. Instead of investing the money as promised, the complaint alleges the adviser spent the money on personal investments and paid back other investors. The adviser was charged with four counts of wire fraud and one count of securities fraud in addition to the civil fraud charged by the SEC. Penalties include up to 20 years in prison for each count. 

"An investment adviser serves in a position of trust and has a fiduciary duty to speak truthfully to clients," G. Jeffrey Boujoukos, director of the SEC's Philadelphia office, said in a statement. "We allege that the adviser breached her clients' trust by misleading investors with false claims of how she invested their money and how those investments performed."

This enforcement action, in ACA’s opinion, is the latest example of a market segment that is in need of greater transparency and better controls around performance reporting. Historically, hedge fund managers have not claimed compliance with the Global Investment Performance Standards (GIPS®) for two main reasons. First, prospective investors did not demand it, and second, the concept of composite reporting was deemed not relevant. With the newly released 2020 edition of the GIPS standards, the tides are changing. One of the major initiatives of the overhaul was to make compliance easier for alternative managers. Given the lack of standardization of investment performance reporting in the alternative manager universe, and the new, more flexible structure of the GIPS standards (removing the concept of composites), compliance is an attractive option for an industry in search of consistency and transparency.

How We Help

ACA Performance Services assists many different alternative asset managers in their efforts to claim compliance with the GIPS standards and ultimately become verified. If your firm is looking for more information into this effort, please contact Christie Dillard at (866) 279-0750.

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About ACA Performance Services

ACA Performance Services provides GIPS compliance verification and consulting services to investment managers around the globe. Our team — comprised of more than 80 professionals with extensive GIPS standards and performance experience — is the largest group of GIPS compliance professionals in the world solely dedicated to GIPS compliance verification and related services.