SEC Settles Charges Against Administrator For Advisers' Misconduct

The SEC settled charges against a firm that provides administrative services to private funds (the "administrator"). The agency found that the firm failed to respond to red flags and correct faulty accounting related to two clients.

The SEC specified that the administrator either ignored or missed red flags that included the following: undisclosed brokerage and bank accounts, related party transactions, inter-series and inter-fund transfers in violation of fund offering documents, and undisclosed margin or credit agreements.

Despite these red flags, the administrator failed to correct the accounting reports and capital statements it had prepared and issued previously to one client, and it continued to provide that client with reports and statements that were materially false. The SEC determined that the client used these false reports and statements to communicate inaccurate financial positions and performance to its investors and independent auditors.