The SEC charged an investment advisor with fraud for allegedly misleading investors about fund performance.

In a Complaint filed in the U.S. District Court for the Central District of California, the SEC alleged that Robert Russel Tweed and his company, Tweed Financial Services (collectively, "Tweed"), raised $1.7 million in investments for a "feeder" fund that would trade using a quantitative stock trading strategy. The SEC alleged that Tweed invested in multiple businesses that failed to generate profits. Despite knowledge of the poor financial performance and legal troubles faced by the businesses, Tweed regularly sent fraudulent account statements displaying positive performance for investors.

The SEC alleged that Tweed allowed certain investors to redeem capital to conceal the fund's underperformance. According to the SEC, these redemptions were paid out based on inflated asset values. Further, the SEC said that Tweed "seemed to prioritize some requests," such as those made by family members, "over others submitted at the same time." These redemptions could be subject to reclamation.

As a result of the alleged misconduct, the SEC charged Tweed with violating Advisers Act Section 206(4) and Rule 206(4)-8. The SEC is seeking redress in the form of civil monetary penalties and permanent injunctions.

Commentary / Steven Lofchie



As was the case with the Madoff fraud, investors who thought that their money was paid out could be vulnerable to a clawback.

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