SEC Issues Risk Alert on Investment Advisers’ Due Diligence Processes for Selecting Alternative Investments
The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) today issued a Risk Alert on the due diligence processes that investment advisers use when they recommend or place clients’ assets in alternative investments such as hedge funds, private equity funds, or funds of private funds. “Money continues to flow into alternative investments. We thought it was important to assess advisers’ due diligence processes and to promote compliance with existing legal requirements, including the duty to ensure that such investments or recommendations are consistent with client objectives,” said OCIE Director Drew Bowden. The alert describes current…
Read MoreSEC Charges Legg Mason Affiliate With Defrauding Clients
The Securities and Exchange Commission today announced sanctions against a California-based investment adviser for concealing investor losses that resulted from a coding error and engaging in cross trading that favored some clients over others. Western Asset Management Company, which is a subsidiary of Legg Mason, agreed to pay more than $21 million to settle the SEC’s charges as well as a related matter announced today by the U.S. Department of Labor. According to an SEC order instituting settled administrative proceedings, Western Asset serves as an investment manager primarily to institutional clients, many of which are ERISA plans. Western Asset breached…
Read MoreSEC Charges KPMG With Violating Auditor Independence Rules
The Securities and Exchange Commission today charged public accounting firm KPMG with violating rules that require auditors to remain independent from the public companies they’re auditing to ensure they maintain their objectivity and impartiality. The SEC issued a separate report about the scope of the independence rules, cautioning audit firms that they’re not permitted to loan their staff to audit clients in a manner that results in the staff acting as employees of those companies. An SEC investigation found that KPMG broke auditor independence rules by providing prohibited non-audit services such as bookkeeping and expert services to affiliates of companies…
Read MoreFormer Oppenheimer Fund Manager Agrees to Settle Fraud Charges
The Securities and Exchange Commission today announced that a former Oppenheimer & Co. portfolio manager has agreed to be barred from the securities industry and pay a $100,000 penalty for making misrepresentations about the valuation of a fund consisting of other private equity funds. The SEC announced administrative proceedings against Brian Williamson last August based on allegations that he disseminated information falsely claiming that the reported value of the fund’s largest investment came from the portfolio manager of the underlying fund. Williamson, who managed the fund of funds, actually had valued the investment himself at a significant markup to the…
Read MoreSEC Obtains Settlements in Penny Stock “Shell Packaging” Case
The Securities and Exchange Commission today announced nearly $300,000 in settlements against a Virginia-based “shell packaging” company and its CEO who were charged with facilitating a penny stock scheme as well as a Bronx, N.Y.-based stock promoter who received proceeds from the fraud. Virginia-based Belmont Partners LLC and its CEO Joseph Meuse are in the business of identifying and selling public shell companies for use in reverse mergers. In an enforcement action in late 2011, the SEC alleged that Meuse and his firm aided and abetted a New York-based company that fraudulently issued and sold unregistered shares of its common…
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