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Alternative Market Briefing

SEC charges former hedge fund manager for misappropriating management fees

Thursday, September 18, 2014

Benedicte Gravrand, Opalesque Geneva:

The U.S. Securities and Exchange Commission (SEC) yesterday charged a former hedge fund manager accused of fraudulently taking excess management fees from the accounts of fund clients and using their money to remodel his multi-million dollar home and buy a $187,000 Porsche.

Sean C. Cooper withdrew more than $320,000 from a hedge fund he managed for San Francisco-based investment advisory firm WestEnd Capital Management LLC. WestEnd’s annual management fee amounts to 1.5% but Cooper withdrew more than that, and transferred the money to his personal bank accounts. The fraud lasted two years, until the SEC started investigating the firm in April 2012.

WestEnd, once aware of the scheme, fired Cooper and reimbursed the hedge fund. But the company is being charged by the SEC for failing to adequately supervise Cooper. WestEnd agreed to pay a $150,000 penalty to settle the SEC’s charges. The San Francisco-based company agreed to stop committing or causing such future violations and was asked to retain a compliance consultant. According to WestEnd's website, there is now a Chief Compliance Officer in place.

Marshall S. Sprung, Co-Chief of the SEC Enforcement Division’s Asset Management Unit said, "His fraud went undetected because WestEnd had no internal controls to limit Cooper’s ability to withdraw excessive amounts from the fund, and there were no controls......................

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