We wrote in April a bit about how the Securities and Exchange Commission’s enforcement officials were reportedly scrutinizing documents more closely than usual. And in just two weeks, they’ve published settlements with five private funds, including a $100,000 settlement with Monsoon Capital over the alleged misuse of $1 million in fund money, and a $1.9 million settlement with Monomy Capital Management (these stories courtesy of our colleagues at Regulatory Compliance Watch).
There are a few buckets you can divide common SEC enforcement actions against private funds into. Monomoy’s case falls into the “fees and expenses” bucket of typical SEC enforcement actions; and Monsoon falls more into the “too many hats” bucket. The idea of a C-suite executive also being CCO is a particular bugbear for the SEC. Monsoon’s owner, founder, senior managing director and chief compliance officer were rolled into one. “Not only does the dual-hat exec lack the time and expertise to serve as CCO, the dual-hat structure precludes any supervision of the all-powerful exec, thereby leaving him/her to engage in wrongdoing, even where others might object,” wrote compliance consultant Todd Cipperman in a recent blog.
Email prepared by Graham Bippart