The US Securities and Exchange Commission has settled charges against Robert D. Press, the former CEO of advisory firm TCA Fund Management Group Corp (TCA) and a portfolio manager, Donna Silverman, for artificially inflating the net asset values and performance results of several Cayman funds they managed.
In May 2020, the SEC previously charged TCA and another affiliated company, TCA Global Credit Fund GP Ltd. (TCA-GP), with fraud and obtained the appointment of a receiver over those entities and the TCA funds. The SEC also previously charged TCA’s former chief operating officer and chief financial officers for their roles in the alleged fraud.
In an order against Press, the SEC found that, through his actions, TCA fraudulently inflated net asset values and performance of the TCA funds by recording non-binding transactions and fraudulent investment banking fees on the funds’ books and records.
According to the order, the inflated asset values and false performance results were included in promotional materials and account statements distributed to the TCA funds’ existing and prospective investors. They showed the funds were always having positive monthly returns.
Without the fraudulently booked transactions, the TCA funds would have had at least 34 months of negative returns since inception, the SEC said.
The order also found that on at least 14 separate occasions, Press waived monthly management and performance fees the TCA funds owed to TCA or TCA-GP to achieve higher performance results, without disclosing to investors that the higher figures were due to the fee waivers, rather than the successful result of TCA’s investment strategies.
The SEC’s order against portfolio manager Silverman said she included the non-binding transactions and fraudulent investment banking fees in data used to calculate the TCA funds’ asset values and performance results.
“Over the course of years, Press and TCA gave investors a false portrayal of the TCA Funds’ investment success, with Press profiting from this misinformation,” said Eric I. Bustillo, director of the SEC’s Miami regional office, in a press release.
The SEC’s orders found that Press violated the antifraud provisions of the federal securities laws and that Silverman aided and abetted violations of certain antifraud provisions.
Without admitting or denying the SEC’s findings, Press and Silverman each agreed to the entry of a cease-and-desist order. In addition, Press agreed to be barred from the securities industry, and to pay disgorgement of overcharged management and performance fees he received of US$4,409,546 plus prejudgment interest of $755,178, and a penalty of $292,570.
Silverman agreed to a limitation on activities from acting in a director or officer capacity in the securities industry, with a right to apply after three years, and to pay a penalty of $50,000.