SEC Charges Private Fund Adviser and Its Principal for Misconduct Relating to Risk Management
April 30, 2020
File No. 19777
April 30, 2020 - The Securities and Exchange Commission today announced settled charges against Everest Capital LLC (Everest), a Florida-based investment adviser, and Marko Dimitrijevic, Everest’s sole managing member, majority owner, Chief Investment Officer, and the sole portfolio manager of the Everest Capital Global Fund, L.P. (Global Fund), for failing to apply risk management procedures to currency positions in the Global Fund and against Everest for providing misleading information regarding the Global Fund’s exposure to currencies.
According to the SEC’s order, the Global Fund’s offering documents stated that Everest’s “disciplined investment management style” was “driven by risk management,” and that the Global Fund’s risk management team could reduce risk independent of Everest’s investment team. Further, materials provided to actual and potential Global Fund investors starting in September 2014 represented that Everest would not take concentrated positions in any single geographic region. The order finds that from September 4, 2014 through January 15, 2015, Everest and Dimitrijevic made highly concentrated investments in the euro to Swiss franc exchange rate such that the Global Fund’s gross exposure based on that position alone ranged from approximately 400% to over 900%. The order further finds that Everest and Dimitrijevic did not apply the promised risk management to the Global Fund’s currency investments, and that the gross exposure information Everest provided in marketing materials was misleading because the materials underreported the Global Fund’s gross exposure by excluding currency positions, including the euro to Swiss franc exchange position. According to the order, on January 15, 2015, the Swiss franc rose more than 30% versus the euro and the Global Fund sustained losses exceeding its assets.
The SEC’s order finds that Everest and Dimitrijevic violated the antifraud provisions of Sections 206(2)and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. Without admitting or denying the findings, Everest and Dimitrijevic agreed to be censured, to cease-and-desist from violating the charged provisions, and to pay a joint and several penalty of $750,000. Everest also agreed to pay disgorgement of $2,000,000 and prejudgment interest of $458,226. In addition, Everest agreed to establish a Fair Fund and distribute the ordered disgorgement, penalty, and prejudgment interest to Global Fund investors pursuant to a respondent-administered distribution.
The SEC’s investigation was conducted by Steven J. Meiner, Robert K. Levenson, and Jessica M. Weissman of the Miami Regional Office. The examination that led to this enforcement action was conducted by Adrian Gonzalez, Victor Pedroso, Sami Aziz, Omar Santos, Jesse Alvarez, Jeannie M. Cabot, and John C. Mattimore of the SEC’s Office of Compliance Inspections and Examinations.