SEC Sues Hedge Fund for Lying to Third Party Selling Agent
The SEC has filed a suit against two hedge funds, their investment adviser, and the principal alleging securities fraud and misrepresentations in connection with offering the funds through third party selling agents. According to the SEC complaint, in response to an asset verification due diligence request from the selling agent, the fund manager doctored the prime brokerage account statement to portray greater assets. The SEC also alleges that the fund manager provided marketing materials to the selling agent that inflated performance.
OUR TAKE: It is noteworthy that the third party selling agent is not named (yet) as a defendant. This case may help third party selling agents and solicitors by giving some guidance about their obligations to conduct due diligence. In this case, according to the SEC, the selling agent did seek asset verification.