Friday, November 11, 2011

SEC Charges San Diego-Based Investment Adviser and Its President with Fraud

The SEC charged a San Diego-based investment advisory firm and its president with fraud for failing to disclose a conflict of interest to clients and materially misrepresenting the liquidity of a hedge fund.

The SEC’s Division of Enforcement alleges that when Western Pacific Capital Management LLC and its president pushed clients to invest in a security, they did not disclose that Western Pacific would receive a 10 percent commission. Western Pacific and its president also failed to register as a broker, failed to provide required written disclosures to clients, improperly redeemed one hedge fund investor’s interest ahead of another’s, and made material misstatements and omissions to clients regarding the fund’s liquidity.

“Investment advisers have a fiduciary duty to act in the best interests of their clients and be forthcoming with them,” said Marshall S. Sprung, Assistant Director in the SEC Enforcement Division’s Asset Management Unit. “[they] breached that duty by failing to disclose the commissions they would receive for the recommended investments and lying to clients about the liquidity of the fund they managed.”


SEC Charges San Diego-Based Investment Adviser and Its President with Fraud
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