[ by Howard Haykin ]

In today's What Went Wrong column, we presented a case in which the SEC charged an investment adviser to several hedges with reporting to investors erroneous performance results that, in turn, led to that adviser over-charging the funds more than $10 million in fees.  [Click to read about the case:  WWW SEC Suspicious Fund ,,,".] The SEC's investigation was conducted by the Agency's Aberrational Performance Inquiry unit - which is described in further detail below. 

The Aberrational Performance Inquiry is a joint effort among the following SEC staff areas:

• Division of Enforcement
• Office of Compliance, Inspections and Examinations (OCIE)
• Division of Risk, Strategy and Financial Innovation. 

Today's case involving Yorkville Advisors:

• 7th case arising from the SEC’s Aberrational Performance Inquiry, an initiative by the Enforcement Division’s Asset Management Unit that uses proprietary risk analytics to identify hedge funds with suspicious returns.

• Performance was flagged as inconsistent with a fund’s investment strategy or other benchmarks forms a basis for further investigation and scrutiny.

• "The analytics put Yorkville front and center on our radar screen.  When we looked further we found lies to investors and the firm’s auditors as well as a scheme to inflate fees by grossly overvaluing fund assets. We will continue to pursue hedge fund managers whose success is based on fiction rather than fact." --  Bruce Karpati, Chief of SEC Enforcement Division’s Asset Management Unit.