Quantek Settles With SEC For Misleading Investors

Quantek Settles With SEC For Misleading Investors

By DEE MOORE

(CN) - Miami-based Quantek Asset Management LLC agreed to pay $3.1 million in fines, total disgorgement and penalties, to the Securities and Exchange Commission for deceiving investors about whether its managers had invested in a Latin America-focused hedge fund or not.
"Quantek misled investors about three important attributes of funds that it managed: management "skin in the game", the funds' investment process and certain related-party transactions.
"At its peak, Quantek managed over $1 billion in assets, primarily through the Quantek Master Fund, SPC Ltd. and its two feeder funds, Quantek Opportunity Fund, L.P. and Quantek Opportunity Fund, Ltd.," the SEC states.
According to the commission, fund managers made various misrepresentations to investors about company executives having personally made investments in the $1 billion Quantek Opportunity Fund when in fact executives had never invested their own money in the fund.
Quantek misled investors about the rigor of the Opportunity Funds' investment process. The funds used an asset-based lending strategy, with a focus on industrial and real estate ventures in Latin America.
The SEC alleges that Quantek officials told investors that investments required approval by a committee of principals who reviewed formal memoranda explaining each proposed investment before it was made and that the principals would then sign the memo if the investment met their approval.
"In reality, Quantek failed to prepare investment committee memos for numerous transactions," the commission says. "[E]mployees prepared and backdated the missing loan documents. Quantek employees also created investment memos designed to appear as if they were drafted before the funds made the loans."
The company "made these misstatements in due diligence questionnaires and in side letter agreements executed with certain institutional investors."
"These materials inaccurately described key terms of the related-party loans and gave the impression that the loans had been sufficiently documented and secured at all times."
The SEC's investigation also found that Quantek misled investors related-party transactions involving its lead executive Javier Guerra and its former parent company, Bulltick Capital Markets Holdings LP.
"The related-party transactions were problematic to begin with, and the false deal documents left investors in the dark about the adviser's conflicts of interest," said Scott Weisman, SEC Assistant Director of the Enforcement Division's Asset Management Unit.
Bulltick, Guerra and former Quantek operations director Ralph Patino were also charged.
"Quantek's investors deserved better than the misleading information they received in marketing materials, side letters, and other fund documents.

Copyright Courthouse News Service 2012

http://www.cnssecuritieslaw.com/2012/06/03/377.htm