SEC Charges Investment Adviser and Its Principal with Misrepresentations and Omissions, Unsuitable Investments, and Compliance Failures

ADMINISTRATIVE PROCEEDING
File No. 3-20689

December 22, 2021 - The Securities and Exchange Commission today announced settled charges against PeachCap Tax & Advisory, LLC, a registered investment adviser based in Atlanta, Georgia, and its principal, David H. Miller, related to Miller's misrepresentations and omissions in selling interests in a hedge fund, PeachCap's and Miller's unsuitable investment advice to their clients concerning the hedge fund, and other violations of the federal securities laws.

According to the SEC's order, The Pessego Long Short Fund, LP, a hedge fund formed by Miller, raised more than $4.6 million from twenty-one investors between May 2016 and October 2016. Seventeen of the fund's investors were advisory clients of Miller and PeachCap. The order finds that when soliciting investors for the hedge fund, Miller made various misrepresentations and omissions concerning the fund's objectives, trading strategies, and performance. The order also finds that the hedge fund was an unsuitable investment for some of Miller's and PeachCap's clients - including the three largest investors in the fund - because those clients had limited investment knowledge and experience, conservative investment objectives, and/or a low risk tolerance. The hedge fund closed in December 2017 after losing over 90% of its value within two years.

The SEC's order further finds that PeachCap engaged in 492 principal trades with six advisory clients without providing transaction-specific notices or obtaining client consent, as required by the Investment Advisers Act of 1940. Finally, PeachCap failed to adopt and implement written policies and procedures reasonably designed to prevent violations of the federal securities laws in connection with principal trading and volatility-linked exchange traded products.

The SEC's order finds that PeachCap willfully violated Sections 206(2), 206(3), and 206(4) of the Advisers Act, and Rule 206(4)-7 thereunder. The SEC's order also finds that Miller willfully violated Section 17(a)(3) of the Securities Act of 1933, Sections 206(2) and 206(4) of the Advisers Act, and Rule 206(4)-8 thereunder. The order further finds that Miller caused PeachCap's violations of Sections 206(2) and 206(4) of the Advisers Act and Rule 206(4)-7 thereunder; and that Miller caused uncharged violations (related to the hedge fund's general partner) of Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder.

Without admitting or denying the SEC's findings, PeachCap and Miller agreed to a cease-and-desist order and to comply with certain undertakings. PeachCap also agreed to be censured and to pay disgorgement of $3,055, prejudgment interest of $759, and a civil penalty of $135,000. Miller agreed to pay a civil penalty of $65,000 and to be barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization. Miller also agreed to a bar from participating in any offering of a penny stock, as well as a prohibition from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter.

The SEC's investigation was conducted by Yolanda L. Ross, with the assistance of trial attorney Robert K. Gordon, and supervised by Thomas B. Bosch, all of the Atlanta Regional Office. The examination that led to the investigation was conducted by Layla Mayer, Wanda Williams, Mark Wszolek, David McClellan, Harvey McConnell, and Donna Esau of the Division of Examinations in the Atlanta Regional Office, with the assistance of Gina Bailey in the Atlanta Regional Office and Olin Filyaw in the Washington, D.C. office.