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SEC acts against hedge-fund official

Date: Tuesday, December 16, 2003

"Federal securities regulators for the first time have taken supervisory action against a hedge-fund executive, in a case involving an employee accused of defrauding investors," writes Deborah Solomon in today's Wall Street Journal. "The 'failure to supervise"' charge against an unregistered hedge-fund adviser is unprecedented by the Securities and Exchange Commission. While the agency has brought similar civil charges against registered investment advisers, such as those who oversee mutual funds, it has never brought a supervisory charge in a case involving a hedge fund, SEC officials said. Unlike mutual funds, hedge funds aren't regulated by the SEC." "Hedge funds are investment pools aimed at wealthy and institutional investors. For years, some in the hedge-fund world assumed that since most hedge funds aren't registered with the SEC, and because they target wealthy investors, those running the funds don't have the same obligations of those running mutual funds, which are registered with the agency. But the charges filed regarding Marque Millennium Group Ltd. is a signal to hedge funds that they, too, must abide by some of the same rules, even if they aren't under the SEC's jurisdiction, SEC officials said." "The SEC's action comes as it pursues a broader goal of eventually regulating the industry. The agency is currently considering whether to require both hedge funds and their advisers to register with the agency. SEC Chairman William Donaldson has said the commission could better prevent hedge-fund fraud if the investment vehicles were subject to routine examinations, as are mutual funds." "In its complaint, the SEC said Wilfred Meckel, Marque Millennium's founder and senior managing director, failed to 'reasonably supervise' Robert Littell, the company's manager of investments. The SEC also charged Mr. Littell with fraud, saying that he inflated the performance of the funds he managed and hid losses from investors. The company, based in Delaware, operates three hedge funds with about $100 million in assets." "According to the SEC's complaint, Mr. Littell tried to hide the funds' losses and provided investors with 'inflated performance information.' Mr. Littell is also accused of giving redemptions at inflated values to several investors totaling more than $3 million." "Both Messrs. Meckel and Littell agreed to settle the SEC's charges but didn't admit or deny the charges. Mr. Meckel agreed to be censured and is barred from association with any investment adviser for six months. Mr. Littell is also barred from association with any investment adviser and is expected to pay a civil fine of $15,000, the SEC said." "Charles Mills, Mr. Meckel's lawyer, said his client was a victim along with the fund's investors. 'Mr. Meckel acted in good faith,' he said. 'He was deceived by an investment manager and, upon discovering the misconduct, promptly undertook remedial acts.' A representative of Marque Millennium Group declined to comment. Mr. Littell, who isn't represented by counsel, didn't return a call seeking comment."