The U.S. Securities and Exchange Commission (SEC) announced on Friday that a Manhattan-based investment advisory firm and its Toronto-based hedge fund manager have agreed to settle charges that they misled investors about a fund’s investment strategy and historical performance. Investors can expect roughly $2.88 million in reimbursements for their losses.
According to the SEC, QED Benchmark Management and its founder/fund manager Peter Kuperman avoided disclosing heavy trading losses to investors by using a misleading mixture of hypothetical and actual returns when providing the fund’s performance history.
After obtaining millions of dollars from investors based on these misrepresentations, QED Benchmark and Kuperman deviated from their stated investment strategy and poured most of the fund’s assets into a single penny stock. They went on to make misleading and incomplete disclosures to fund investors about the value and liquidity of this penny stock investment.
Andrew M. Calamari, director of the SEC’s New York Regional Office, commented:
Investment advisers must be completely candid when disclosing two key features that investors rely upon when making investment decisions: investment strategy and historical performance. This settlement enables investors in the QED Benchmark LP hedge fund to receive full monetary relief for losses suffered when they were misled on both fronts.
Ultimately, the SEC order found that Kuperman and QED Benchmark Management violated the antifraud provisions of the Securities Act of 1933, Securities Exchange Act of 1934 and Investment Advisers Act of 1940. They consented to the order without admitting or denying the findings. In addition to making the $2.877 million payment to fully reimburse fund investors for their losses, Kuperman has agreed to pay a $75,000 penalty and be barred from the securities industry.
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