Hedge Fund Reader : SEC issues cease-and-desist orders against two Californian investment advisers

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August 07, 2005

SEC issues cease-and-desist orders against two Californian investment advisers

Two Californian investment advisers faced the brunt of Securities and Exchange Commission when it issued a cease-and-desist order and also pay a $20,000 civil penalty. Gerald Klein & Associates and to Klein, Pavlis & Peasley Financial are registered advisers and co-managers of two small hedge funds which go by the names – Invest Talk 1 & Invest Talk 2. SEC charged them with gross violation of regulatory lays and asked them to close operations. The two advisers were accused of having more than 35 non-accredited members in it funds where as the law stipulates that it should remain under the number. Accreditation actually implies that the investor should have an annual income in excess of $ 2000,000 and should have a net worth exceeding $1 million. Apart from this the two were also found guilty on account of advertising the funds through radio programs, seminars and through websites. The two advisers did not deny these allegations but added that they did not know that advertising through these media was not allowed. On the number of un-accredited members, they said that SEC is counting the combined base of the two funds which according to the advisers are two different funds as they employ different strategies. But SEC has different opinion on the same. Thestreet.com reports:

“The SEC found that the two advisers broke the law by selling their hedge funds via radio programs, seminars and Web sites. The SEC also alleged that the funds had more than 35 non-accredited investors, another SEC violation.”

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August 7, 2005 in Research | Permalink