A Colorado investment adviser was charged with fraud and breach of fiduciary duty in the marketing and recommendation of his firm's hedge funds to investors, including many elderly clients.  Neal Greenberg is alleged to have falsely stated that the Agile hedge funds offered and managed by his two IA firms were suitable for conservative investors who were retired or nearing retirement.  The funds, however, used leverage and concentrated in a small number of investments - and they suffered substantial losses in September 2008 and ceased redemptions to investors.  SEC Enforcement further alleges that the Agile hedge funds improperly collected approximately $2 million in management and performance fees that were not adequately disclosed to investors. 

Apparently, the majority of Greenberg's advisory clients were generally conservative, older investors who wanted low-risk investments offering significant capital protection.  Yet, Greenberg stated that the hedge funds could safely represent an investor's entire investment portfolio, and that they used leverage in a way that did not significantly increase the risk profile of the funds. The risk disclosures in private placement memoranda for the Agile hedge funds for 2007 and 2008 contradicted Greenberg's false and misleading verbal and written representations to investors.

With regard to fees, the SEC's order notes that when one Agile hedge fund invested in another Agile hedge fund, investors were assessed performance and management fees on the leveraged portion of their investment.  These fees, totaling about $2mn between 2003 and 2006, were not disclosed to investors.

The SEC credited John Mulhern and Jay Scoggins with conducting the investigation.   [SEC PR 10-165, 9/7]