US: SEC charges "hedge fund" introducer with fraud.
The USA's Securities and Investment Commission has charged a Californian man with fraud, alleging an undisclosed conflict of interest when recommending investing in a fund that later went belly up and lost almost its entire investment.
The Securities and Exchange Commission yesterday charged a San Luis Obispo, Calif.-based investment adviser and its owner with fraud for failing to disclose a material conflict of interest when recommending that their clients invest in a hedge fund that made undisclosed subprime and other high-risk investments.
The SEC alleges that WealthWise LLC and its principal Jeffrey A. Forrest recommended that more than 60 of their clients invest approximately USD40 million in Apex Equity Options Fund, a hedge fund managed by Salt Lake City-based Thompson Consulting, Inc. (TCI).
According to the SEC's complaint, WealthWise and Forrest failed to disclose a side agreement in which WealthWise received a portion of the performance fee that Apex paid TCI for all WealthWise assets invested in the hedge fund.
From April 2005 to September 2007, WealthWise received more than USD350,000 in performance fees from TCI.
Apex collapsed in August 2007, and WealthWise clients lost nearly all of the money they invested.
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