The SEC today revealed an enforcement action against two San Francisco investment adviser firms, their top executives and legal counsel.
American Pegasus Investment and American Pegasus LDG CEO Benjamin P. Chui, portfolio manager Tiffany Mok and lawyer Charles E. Hall engaged in improper self-dealing, failed to disclose conflicts of interest and misused client assets, the commission said today.
The three agreed to settle the charges without admitting guilt. They don’t appear to face criminal charges.
The two firms managed some $150 million in assets held by several offshore hedge funds invested in subprime automobile loans and life settlements. In 2007, Chui used more than $18 million in loans and advances from the largest hedge fund, Auto Loan Fund, to buy the fund’s sole supplier of auto loans for himself, Mok and Hall -- without disclosing it to investors, the SEC says. In doing so, Chui created a pervasive conflict of interest as the three “had a duty to maximize the fund’s performance while at the same time had an interest in generating profits for the loan supplier they secretly owned,” the SEC says.
The commission details one instance in 2009 in which the trio purchased an auto loan portfolio for $12 million and then -- the same day -- sold it to the Auto Loan Fund for more than $38 million, resulting in a 300 percent profit.
Chui of San Carlos agreed to pay a $175,000 penalty and is barred from associating with an investment adviser for five years. Mok of Fremont agreed to pay a $75,000 penalty and is suspended from associating with an investment adviser for one year. Hall, who is barred in California but whose practice is in Carlisle, Penn., agreed to pay a $100,000 penalty and is barred from associating with an investment adviser for three years and from appearing or practicing before the SEC as an attorney for three years.
The two firms were ordered to disgorge $850,000 in management fees.