Fund Manager Sanctioned for Email about Redemption Activity
The SEC sanctioned and fined a hedge fund and its principal for making misrepresentations to a potential investor about redemptions in the fund. According to the SEC, the respondents lied to a family office’s investor representative who inquired about net redemptions in the fund as the 2008 financial crisis unfolded. The SEC alleges that an email sent by the respondents indicated that the fund only had two minor, partial redemptions and that the fund had net inflows. However, the SEC asserts that the respondents failed to disclose a significant affiliate redemption that resulted in net outflows. The SEC charges violations of the anti-fraud rules under the Exchange Act and the Advisers Act.
OUR TAKE: Oral and email statements, if untrue, can have the same securities law implications as written marketing materials.