SEC Charges Private Fund Administrator with Gatekeeping Failures
The Securities and Exchange Commission (SEC) recently announced an administrative settlement with Apex Fund Services (US) Inc., a firm providing administrative services to private funds, based on its alleged failure to heed red flags and correct faulty accounting by two private equity managers.
The SEC alleged that, in carrying out its contractual fund administration functions, Apex missed or ignored clear indications of fraud perpetrated by two private fund managers, making Apex a "cause" of that fraud under Sections 206(2) and 206(4) of the Advisers Act and Rule 206(4)-8 thereunder. In charging Apex in connection with ClearPath and EquityStar's violations, the SEC is highlighting its expectation that fund administrators live up to their "gatekeeper" responsibilities and take affirmative action to ensure that fund records provide accurate information about the value and existence of fund assets. In this update, we offer background on the SEC's action and consider the resulting warning it sends to all gatekeepers: the SEC will use negligence-based securities laws to hold service providers responsible, especially where indications of fraud are ignored. READ THE FULL UPDATE
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Before proceeding, please note: If you are not a current client of Perkins Coie, please do not include any information in this e-mail that you or someone else considers to be of a confidential or secret nature. Perkins Coie has no duty to keep confidential any of the information you provide. Neither the transmission nor receipt of your information is considered a request for legal advice, securing or retaining a lawyer. An attorney-client relationship with Perkins Coie or any lawyer at Perkins Coie is not established until and unless Perkins Coie agrees to such a relationship as memorialized in a separate writing.
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Drawing from breaking news, ever changing government priorities, and significant judicial decisions, this blog from Perkins Coie’s White Collar and Investigations group highlights key considerations and offers practical insights aimed to guide corporate stakeholders and counselors through an evolving regulatory environment.