In a recently announced enforcement action (In the Matter of Acamar Global Investments, LLC and Rudolph A. Martin, IAA Release No. 4050, March 18, 2015), a former SEC-registered investment adviser and its principal were sanctioned for making material misstatements about the adviser’s amount of assets under management and performance regarding its investment models.
According to the SEC’s allegations in the matter, the adviser stated that it had more than $150 million of assets under management when it had less than $1 million. The adviser made the misstatement in order to maintain registration with the SEC. Also, according to the SEC’s allegations, the adviser stated on its website and in promotional materials performance numbers of its investment models but failed to state that the performance numbers were not based on actual trading. In addition, the one client of the adviser was convinced to invest in the adviser’s hedge fund which promptly lost over 90 percent of its value.
The adviser was registered with the SEC until 2014 when it became de-registered. The adviser did not have the required amount of assets under management (registration requires more than $100 million of AUM) to continue registration with the SEC. At the time of de-registration, the adviser’s assets under management was about $24.
As a result of the misstatements of material fact, the adviser and its principal violated the “anti-fraud provisions” under Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 and with respect to false statements about its hedge fund, violations of Section 206(4) and Rule 206(4)-8 under the Advisers Act.
The parties agreed to settle the enforcement matter by way of an SEC enforcement order that prohibits the adviser and its principal from any further violations of the anti-fraud provisions, bars the principal from association with, among other entities, an investment adviser, and serving in any capacity with, among other entities, an investment adviser.