WASHINGTON (HedgeWorld.com)–NASD announced that it has censured and fined Altegris Investments Inc., La Jolla, Calif., US$175,000 for marketing hedge funds to investors without fully explaining the associated risks.
Alternatives investment consultant Altegris consented to these actions but neither admitted nor denied the charges by NASD.
The firm’s chief compliance officer, Robert J. Amedeo, also was censured for failure to supervise. He was fined jointly and severally US$20,000.
“The NASD acknowledged that we delivered offering documents to investors that may have described some or all of the risks associated with hedge fund investing,” said Jon Sundt, president of Altegris, Tuesday. “However, they are requiring that each piece of sales literature independently comply with their risk disclosure standards.”
According to Mary L. Schapiro, NASD vice-chairman and president of regulatory oversight, the censure and fine are part of NASD’s broader review of hedge fund sales practices Previous HedgeWorld Story. They reinforce “NASD’s commitment to ensuring adherence to the highest standards of good faith and fair dealing,” she said in a statement.
Mr. Amedeo, an attorney active in the alternative investments field for 25 years, said he understands that hedge funds are coming under increasing scrutiny, but he said he is “bullish” on the market for such funds. As to the instant censure and fine, he said, “The gravamen of their interest in this is that they’re requiring that all risks must be disclosed within the four corners of each marketing piece.”
He said that he had mistakenly assumed that the incorporation by reference of disclosures to the risks in other documents, in particular in the offering memorandum, would suffice. “In every case,” of which the NASD has complained, “an offering memorandum was sent either before or with the sales materials.”