Corgentum Consulting Discusses the Risks of Form ADV Disclosures with Institutional Investor
Corgentum Consulting Managing Partner, Jason Scharfman has written an op-ed piece for Institutional Investor entitled, “New Fund SEC ADV Disclosures: A Wolf in Sheep’s Clothing?” This piece discusses the challenge investors face in balancing mandatory regulatory disclosures with fund transparency.
The SEC is now requiring fund managers to report more information by revising Form ADV disclosures. In this article, Mr. Scharfman explains that it is still important to perform operational due diligence regardless of changes made to ADV disclosures and the yellow flags to look for when doing so. The piece also encourages investors to be aware of the fact that just because the SEC might require more information from funds, does not mean that there is as much quality in the documents as there is quantity.
To read the full Institutional Investor article, please click here. 
Madoff’s Daughter-In-Laws will Pay the Price for Notorious Ponzi Scheme
There has been new developments regarding the ongoing case of Bernard Madoff. While Madoff is serving a 150 year sentence in prison, his daughter-in-laws will now be paying the price for him and his son’s infamous Ponzi scheme.
Just last week, new claims were filed against the Madoff family in an Irving Picard $255 million complaint. The case has been revised to include both Deborah Madoff and Stephanie Mack to the “$54.5 million in claims for unjust enrichment,” The Washington Post reported. The wives are also being sued for $3 million that was given to them.
Although it has been said that a judge might end up barring these claims, Picard could still sue for unjust enrichment and constructive trust, said US Bankruptcy Judge Burton Lifland in Manhattan. It is, however, too late to charge the Madoff son’s wives with all of the other past charges brought up on the family.
Picard is still trying to retrieve investor money lost during Madoff’s Ponzi scheme.
Mark Madoff, the son of Bernie Madoff, committed suicide in December 2010.
Stephanie Mack, Mark Madoff’s wife, speaks out about her husband’s suicide after Madoff Ponzi Scheme
Click here to discuss this post.
SEC Sues a Utah Hedge Fund Owner for Inflating Assets…
Russell K. Cannon has been sued by the SEC, along with three others, for charging disproportionate fees and inflating assets. Cannon is being sued because he apparently inflated a stock detained by RKC Matador Funds by way of trading on the final day of the month and “by dictating the price the stock was listed at on Matador’s financial reports to clients.”
The fees and assets, as well as the outside members affiliated with the fund, would have been looked at more carefully during an operational due diligence review.
It seems that because Cannon’s pay rested on the performance of Matador, Cannon felt the need to inflate Global’s share price when it wasn’t doing as well as he’d hoped. Cannon also went as far as to put a false share price on Matador’s monthly brokerage statements.
It is unclear just how long Cannon was getting away with these discrepancies in fund data and trading, but perhaps a deeper look into the fund would have raised yellow flags for investors seeking transparency among the funds they were choosing to invest in.
Cannon’s lawyer is refuting the allegations brought up against his client and says that Russell Cannon did not do anything wrong and that they disagree with charges.
“The SEC asks that Cannon be ordered to halt the allegedly fraudulent activities, pay a fine and disgorge profits.”
Investors cannot solely rely on the SEC to detect fraud and other issues within hedge funds. This is why it is important for the investor to take it upon themselves to work with an operational due diligence consultant that will look use their expertise to focus in on the small details that may sometimes slip between the cracks, causing more serious problems in the long run.
