Hedge Week: The Securities and Exchange Commission has charged a San Diego-based investment advisory firm and its president with fraud for failing to disclose a conflict of interest to clients and materially misrepresenting the liquidity of a hedge fund they managed.
The SEC’s Division of Enforcement alleges that Western Pacific Capital Management LLC and Kevin James O’Rourke urged clients to invest in a security without disclosing that Western Pacific would receive a 10 percent commission. Western Pacific and O’Rourke also failed to register as a broker, failed to provide required written disclosures to clients, improperly redeemed one hedge fund investor’s interest ahead of another’s, and made material misstatements and omissions to clients regarding the fund’s liquidity.
“Investment advisers have a fiduciary duty to act in the best interests of their clients and be forthcoming with them,” said Marshall S Sprung, Assistant Director in the SEC Enforcement Division’s Asset Management Unit. “Western Pacific and O’Rourke fraudulently breached that duty by failing to disclose the commissions they would receive for the recommended investments and lying to clients about the liquidity of the fund they managed.”
