Former Fund Compliance Officer Charged with Securities Fraud
The SEC charged a former mutual fund compliance officer with securities fraud for his role in furthering an offshore offering scheme that siphoned assets into personal accounts.
The SEC asserts that the former compliance officer along with the defendant firm and its principal misled investors about the Cayman-registered, NASDAQ-listed fund they managed. The SEC pleads that the fund did not invest in U.S Treasuries and reverse repos collateralized by Treasuries as described in the prospectus and fact sheets. Instead, the SEC seeks to hold the defendants accountable for moving assets to third party shell companies they controlled. The scheme unwound when the defendants refused to honor the redemption request of one of the largest investors, leading to an SEC investigation.
A registered Cayman fund listed on NASDAQ does not have the same protections as a U.S. registered fund. Some of the protections required by U.S. law that could have avoided this scheme include independent directors, a responsible Chief Compliance Officer and compliance program, prohibitions on affiliated transactions, and robust auditing requirements. The SEC usually holds compliance and legal professionals to a higher standard because they are expected to know the law and how to apply it, rather than manipulate and avoid it.
Read complaint here.