SEC Charges Fund Manager for Failing to Disclose Placement Fees

The SEC instituted an enforcement action against an adviser/hedge fund manager that it alleges failed to tell clients that it received a 10% placement fee on a particular security that it recommended.  The SEC charges that the adviser recommended the security and included it in its hedge fund and received over $400,000 in placement fees.  The SEC charges that the respondent violated the anti-fraud rules and failed to register as a broker-dealer. 


OUR TAKE: An interesting open question is whether full disclosure as required by the solicitation rule (206(4)-3) would have avoided the charge of failing to register as a broker-dealer.



 

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