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.<\/p>\n
The SEC\u2019s Division of Enforcement alleges that Western Pacific Capital Management LLC and Kevin James O\u2019Rourke urged clients to invest in a security without disclosing that Western Pacific would receive a 10 percent commission. Western Pacific and O\u2019Rourke also failed to register as a broker, failed to provide required written disclosures to clients, improperly redeemed one hedge fund investor\u2019s interest ahead of another\u2019s, and made material misstatements and omissions to clients regarding the fund\u2019s liquidity.<\/p>\n
\u201cInvestment advisers have a fiduciary duty to act in the best interests of their clients and be forthcoming with them,\u201d said Marshall S Sprung, Assistant Director in the SEC Enforcement Division\u2019s Asset Management Unit. \u201cWestern Pacific and O\u2019Rourke 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.\u201d<\/p>\n