Hedge Fund Auditor Charged by SEC Over Misleading Financial Statements

May 5th 2015
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An accountant who audited misleading financial statements from a Santa Barbara, California-based hedge fund has paid $75,000 to settle charges brought by the US Securities and Exchange Commission (SEC).

An investigation by the US stock-market regulator also charged two of the fund’s executives with improper allocations of fund assets to pay undisclosed operating expenses.

Alpha Titans’ principal, Timothy McCormack, and general counsel Kelly Kaeser used assets of two affiliated private funds to pay more than $450,000 in office rent, employee salaries and benefits, and similar expenses without clear authorization from fund clients and without accurate and complete disclosures that fund assets were being used for these purposes, the SEC said.

Simon Lesser, the firm’s outside auditor, was aware how Alpha Titans used fund assets but still gave his final approval of audit reports containing unqualified opinions that the funds’ financial statements were presented fairly.

McCormack and Kaeser sent investors audited financial statements that failed to disclose almost $3 million in expenses tied to transactions involving other entities controlled by McCormack, the SEC added.

The executives and the auditor agreed to settle the SEC’s charges without admitting or denying the SEC’s findings.

Lesser agreed to pay a penalty of $75,000 and consented to an order suspending him from practicing as an accountant on behalf of any entity regulated by the SEC for at least three years.

McCormack agreed to pay disgorgement of $469,522, prejudgment interest of $28,928, and a penalty of $200,000.

McCormack and Kaeser each agreed to be barred from the securities industry for one year. Kaeser agreed to a one-year suspension from practicing as an attorney on behalf of any entity regulated by the SEC.

This article was originally posted on AccountingWEB UK.


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