The Securities and Exchange Commission announced Wednesday that it has separately charged a pair of hedge fund managers and their firms with lying to investors about how they were handling the money invested in their respective hedge funds.
In one case, the SEC alleges that San Francisco-based hedge fund manager Hausmann-Alain Banet and his firm Lion Capital Management stole more than a half-million dollars from a retired schoolteacher who thought she was investing her retirement savings in Banet’s hedge fund. In the other case, the SEC charged Chicago-based hedge fund managers Norman Goldstein and Laurie Gatherum and their firm GEI Financial Services with fraudulently siphoning at least $147,000 in excessive fees and capital withdrawals from a hedge fund they managed.
The charges are the latest in a series of actions taken by the SEC Enforcement Division and its Asset Management Unit against hedge fund-related misconduct in the markets. On the same day, the SEC’s Office of Investor Education and Advocacy issued an investor bulletin detailing some of those cases as examples of why investors must rigorously evaluate a hedge fund before investing in it.
Since the beginning of 2010, the SEC says it has filed more than 100 cases involving hedge fund malfeasance such as misusing investor assets, lying about investment strategy or performance, charging excessive fees, or hiding conflicts of interest.
This month, the SEC also plans to launch a new examination strategy targeting advisors to hedge and private equity funds who registered in response to the Dodd-Frank Act.
According to the Regulatory Compliance Association, the SEC plans to dispatch “Regulatory Expectation” letters to these advisors, “outlining the new exam approach, requirements and document production obligations.”
The new “Presence Examination” strategy, the Regulatory Compliance Association says, constitutes a new regulatory inspection developed by the Office of Compliance Inspections and Examinations (OCIE), “which seems more comprehensive than the traditional ‘sweep’ examination yet more targeted than the typical routine examination.”