SEC Announces Fraud Charges against Investment Adviser Accused of Concealing Poor Performance of Fund Assets

The SEC announced fraud charges against an investment adviser and the firms she controlled for hiding the poor performance of loan assets in three of the collateralized loan obligation ("CLO") funds they managed.

According to the SEC, the investment adviser and her Patriarch Partner firms breached their fiduciary duties and defrauded clients by failing to value assets using the methodology described to investors in offering documents for the CLO funds, which contained portfolios composed of loans to distressed customers.

Instead, the SEC alleged, nearly all valuations of loan assets were reported to investors as unchanged from the time they were acquired, despite the fact that many of the companies made partial or no interest payments to the funds for several years. According to the SEC, the adviser and her firms misled investors to believe that objective valuation analyses were performed.

See: SEC Order; SEC Press Release.