SEC Charges Principal of Mutual Fund Adviser with Failing to Disclose Conflicts of Interest

ADMINISTRATIVE PROCEEDING
File No. 3-20286

May 10, 2021 - The Securities and Exchange Commission today announced settled charges against Peter DeCaprio, a former principal of defunct investment adviser Crow Point Partners, LLC, concerning conflicts of interest that were not disclosed to a mutual fund client advised by Crow Point, the EAS Crow Point Alternatives Fund (EAS Fund).

According to the SEC's order, between April 2015 and June 2016, at DeCaprio's direction, Crow Point made a series of investments of the EAS Fund's assets into a private fund available as an investment option on an investment adviser-sponsored investment platform. The order finds that as of July 31, 2016, over $8 million - or nearly 28% - of the EAS Fund's net assets were invested in the private fund. The order also finds that from at least September 2015 through January 2017, Crow Point had material financial ties to the private fund adviser and the investment platform adviser that created incentives for Crow Point to make or maintain investments in the private fund and the investment platform. As described in the order, the financial ties giving rise to the conflicts of interest included, for example, Crow Point's serving as a sub-adviser to an affiliated unregistered fund of the private fund, and a mutual referral agreement between Crow Point and the investment platform adviser under which Crow Point and the investment platform adviser agreed to compensate one another for referring assets under management. According to the order, DeCaprio had negotiated the agreements that created these and other financial ties between Crow Point and the advisers. The order finds that the ties created conflicts of interest that were not disclosed to Crow Point's client, the EAS Fund.

The order charges DeCaprio with violating Section 206(2) of the Investment Advisers Act of 1940. Without admitting or denying the SEC's findings, DeCaprio agreed to a cease-and-desist order, a censure, and a $75,000 civil penalty.

The SEC's investigation was conducted by Andrew Elliott, Jonathan Shapiro, and John Farinacci, and supervised by Amy Friedman and Carolyn Welshhans.