Tags: SAC | Paulson | fund | SEC

SEC Charges Firm That Put Money With SAC, Paulson Funds

Wednesday, 29 April 2015 05:08 PM

An investment firm that funneled client money into some of the world's hottest hedge funds, including SAC Capital and Paulson & Co, on Wednesday was ordered to hire an independent monitor to supervise the final stages of the fund's shutdown, and to pay nearly $700,000 in fees and penalties to settle charges that executives used clients' cash to pay for office rent and employee salaries.

Alpha Titans LLC founder Timothy McCormack, 58, and its lawyer Kelly Kaeser, 46, took more than $450,000 out of the funds to pay staff and cover the rent on their Santa Barbara, California-based office without their clients' permission, the Securities and Exchange Commission said in a complaint released on Wednesday.

The men also sent investors audited financial statements where they failed to disclose almost $3 million in expenses tied to transactions involving other entities, according to the SEC complaint.

McCormack said the firm had decided to shut down the fund at the end of last year after assets had dwindled to a point where it was no longer economical to run the fund.

Before its shutdown, Alpha Titans oversaw $16.3 million in assets in one of the fund's share classes, according to an SEC disclosure filed in early 2014, the latest such disclosure.

Alpha Titans in 2009 promised return-hungry investors access to a who's who among fund managers, according documents seen by Reuters. It put money with Moore Capital Management, Tudor Investment Corp, Brevan Howard Asset Management, Ray Dalio's Bridgewater Associates and others, according to the documents. These managers earned an average 19.74 percent return a year and were managing roughly $13.7 billion, Alpha Titans told clients, according to the documents.

But the firm also made clients pay for more than they knew about, the government charged.

"Alpha Titans did not make the proper disclosures for clients to decipher that the funds were footing the bill for many of the firm's operational expenses," Marshall Sprung, co-chief of the SEC Enforcement Division's Asset Management Unit said in a statement.

By bringing this case, the SEC may be signaling that it intends to look more closely at what private fund managers are telling clients. An SEC spokeswoman declined to comment further on the case.

"This will not be an isolated case," said Bradley Alford, chief investment officer at Alpha Capital Management. "This is a wakeup call to private partnerships."

Regulators also charged that Simon Lesser, an outside accountant for the firm, knew about the omissions.

McCormack and Kaeser may not work in the securities industry for one year, and Kaeser may not offer legal advice to any SEC-regulated entity for one year, the SEC order said.

A lawyer for both of the men could not be reached for comment.

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An investment firm that funneled client money into some of the world's hottest hedge funds, including SAC Capital and Paulson & Co., on Wednesday agreed to shut down and pay nearly $700,000 in fees and penalties to settle charges.
SAC, Paulson, fund, SEC
Wednesday, 29 April 2015 05:08 PM
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