Last week, Bridging the Week reported that Duet Asset Management Ltd., a Commodity Futures Trading Commission-registered commodity pool operator, agreed to pay a fine of US $1 million to the National Futures Association to resolve charges that the firm caused commodity pools it managed to loan or advance money to entities affiliated with Henry Gabay, the firm’s chief executive officer and a principal. (Click here at access the article entitled "CPO Fined US $1 Million for Making Prohibited Loans and Advances to CEO From Funds’ Assets.") In Mr. Duet’s and Mr. Gabay’s settlement offer, the respondents neither admitted nor denied any of NFA’s allegations. The following statement was received from Darius Athill, Senior Consultant, Peregrine Communications Group, on behalf of Duet and Mr. Gabay in response to last week’s Bridging the Week article:
Duet Group specializes in niche investment strategies involving complex and added-value transactions. It takes advantage of cross-fertilization among its various asset classes, from long-only equity, debt funds, hedge funds, private equity and real estate, to create above average returns for its sophisticated, institutional investor base.
Duet Asset Management (DAM) failed to appreciate the extent to which NFA rules prohibit related parties transactions, even when done on commercially reasonable terms. These types of related parties transactions would ordinarily be allowed by other regulatory bodies as long as they are properly disclosed to investors. The transactions in question were generally disclosed in our fund annual reports or elsewhere.
DAM believes these transactions should not be characterized as a misuse of the pools’ assets, were done for the pools’ benefit, and in almost every instance resulted in market, or above-market returns for the pools. Investor funds were not harmed in any way.
DAM fully cooperated with the NFA and has decided to settle, without admitting or denying the violations. Since January 2016, DAM has already undertaken remedial measures to prevent any future violation of NFA rules, including the creation of an internal policy prohibiting all related parties transactions falling under the NFA’s jurisdiction.