Hedge Fund Adviser to Pay $5 Million for Compliance Failures Related to Valuation of Fund Assets

The Securities and Exchange Commission today announced that a private fund manager in the mortgage-backed securities space has agreed to pay a $5 million penalty to settle charges stemming from compliance deficiencies that contributed to the firm’s failure to ensure that certain securities in its flagship fund were valued properly. The fund manager’s chief investment officer (CIO) agreed to pay a $250,000 penalty. An SEC investigation found that Colorado-based investment adviser Deer Park Road Management Company LP, in connection with its flagship STS Partners’ fund which has been ranked as one of the most consistent performing hedge funds in the country, failed to have policies and procedures to address the risk that its traders were undervaluing securities and selling for a profit when needed.