The Securities and Exchange Commission recently filed settled charges against a Boca Raton, Florida based fund administrator, Theorem Fund Services LLC (TFS), for its failure to respond to red flags regarding a fraudulent scheme perpetrated against a private fund and its investors.
Per the SEC’s administrative order, TFS rendered administration services to a fund managed by an entity and its principal who the SEC previously sued for allegedly engaging in a five-year securities fraud scheme involving the misuse and misappropriation of investors capital.
The SEC’s administrative order further contends that during TFS’s engagement, the fund incurred material trading losses, yet TFS, at the direction of the fund and its principal, calculated the Net Asset Value without recognizing the trading losses, and then issued to investors account statements that significantly overstated their investments’ value.
In its public comments on the case, the SEC, through its Enforcement Division’s Asset Management Unit, emphasized the critical gatekeeping role fund administrators play in the private fund space. The SEC further stressed that given its gatekeeping role, TFS failed in its obligations given its failure to adequately respond and react to “clear red flags.”
The SEC’s order found that TFS was a cause of certain of the fund’s and its principal’s violations of the Securities Act of 1933 and of the Investment Advisers Act of 1940 and Rule 206(4)-8(a)(1) thereunder. As part of the settlement, TFS agreed, with neither admitting nor denying the SEC’s findings, to a cease-and-desist order and to pay a $100,000 civil penalty. TFS also agreed to pay disgorgement of $18,000 and prejudgment interest of $4,271.
Securities Fraud Scheme Defense Lawyer
David Chase, Esq. of the Law Firm of David R. Chase, a SEC investigation defense law firm, is now a SEC defense lawyer and represents individuals and registered entities in SEC investigations around the nation. You may contact him toll-free at: 800-760-0912 or e-mail at: firstname.lastname@example.org, and can visit the Firm’s website for more information and content at: www.davidchaselaw.com.