Fund Administration Officers to Disgorge Some Compensation in SEC Settlement
The President and General Counsel of a fund administration company agreed to a cease and desist orders and pay disgorgement relating to their roles in allegedly aiding and abetting their employer’s client’s violations of the anti-fraud provisions of the Advisers Act. The case arose out of undisclosed payments from the administration company to its fund sponsor client in exchange for recommending that the Board approve the appointment of the fund administrator. The SEC charges that the two officers knew about the arrangement and either failed to disclose it or offered misleading disclosure. The SEC does not indicate the basis for the disgorgement order other than to note in the action against the General Counsel that she received a performance bonus as part of her compensation package.
OUR TAKE: These cases extend the SEC’s efforts to prosecute individual corporate officers who further the unlawful actions of their employers. In this case, the charge is aiding and abetting the employer who was also an aider and abettor, rather than a primary violator. It is also somewhat unusual for the SEC to base a disgorgement order on the pay/bonus received by an employee rather than some specific compensation related to the alleged wrongdoing.