WEST PALM BEACH, FL (www.hedgeco.net) – A new study conducted by the Association of Certified Fraud Examiners concluded that fund fraud occurs in situations where supervision, separation of powersand transparency were lacking. The study also said such fraud occurs in part at least on an absence of regulation. Citing the case of Charles Schmitt & Associates, the study concluded thatalthough the firm was licensed by the Securities and Futures Commission, its hedge fund vehicle CSA Absolute Return Fund was not registered with the SFC.<\/p>\n
The CSA Absolute Return Fund also escaped SFC monitoring, leading to a lack of supervision of the fund\u00c3\u00af\u00c2\u00bf\u00c2\u00bds asset allocation decisions. The study concluded that Hedge Fund managers have been traditionally reluctant to disclose specifics of their funds operations and risk. Such conclusion fails to take into account today\u00c3\u00af\u00c2\u00bf\u00c2\u00bds realities noted an anonymous source, because the hedge fund industry has achieved a higher degree of transparency today compared to the days of Long Term Capital Management.<\/p>\n
Hill & Associates also said, \u00c3\u00af\u00c2\u00bf\u00c2\u00bdManagers typically lied about their own level of experience and the performance records of the funds.\u00c3\u00af\u00c2\u00bf\u00c2\u00bd It remains unclear how the study reached such conclusion because no specific scientific data or research were used to demonstrate the validity of such assertions.<\/p>\n
Referring to the failed Charles Schmitt & Associates, the study authors Hill & Associates, said, \u00c3\u00af\u00c2\u00bf\u00c2\u00bdNo Investment Company registered with the SFC should be allowed to invest in a hedge fund unless its board adopts procedures to ensure that the hedge fund’s assets are valued in keeping with a standard, possibly set by legislation.\u00c3\u00af\u00c2\u00bf\u00c2\u00bd<\/p>\n
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net<\/p>\n
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