In the Matter of Northern Trust Hedge Fund Services LLC, et al. Admin. Proc. File No. 3-20030
Oct. 14, 2022
On September 18, 2020, the Commission instituted and simultaneously settled cease-and-desist proceedings (the “Order”) against Northern Trust Hedge Fund Services LLC, Northern Trust Global Fund Services Cayman Limited (collectively, the “Respondents”). In the Order, the Commission found that from at least 2013, through mid-2017, Donald S. LaGuardia (“LaGuardia”), through the investment adviser he controlled, L-R Managers, LLC (“L-R Managers”) (collectively with LaGuardia, the “Advisers”), defrauded the Funds and their investors, misappropriating money from the Funds and directing that some of the misappropriated amounts be recorded as a promissory note and receivable “due from” L-R Managers to the Funds to conceal the misappropriation. The Commission further found that the Respondents caused the Advisers’ violations of the antifraud provisions of the Investment Advisers Act of 1940 by, among other things, failing to adequately escalate concerns they identified regarding the Advisers prior to their engagement, permitting the Advisers to make unsupported withdrawals, improperly accounting for account receivables, and failing to obtain sufficient pricing support for a significant holding of the Funds. The Commission ordered Northern Trust Hedge Fund Services LLC to pay disgorgement of $14,076 and prejudgment interest of $2,553, and ordered the Respondents, jointly and severally, to pay a civil money payment of $150,000. The Commission created a Fair Fund pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the penalties paid, along with the disgorgement and prejudgment interest paid, can be distributed to harmed investors (the “Fair Fund”). See the Commission’s Order: Release No. IA-5585.
The Fair Fund includes the $167,629 paid by the Respondents. The Fair Fund has been deposited in an interest-bearing account at the U.S. Department of the Treasury’s Bureau of the Fiscal Service, and any interest accrued will be added to the Fair Fund.
On October 6, 2022, the Commission published a notice of the proposed plan of distribution and opportunity for comment and simultaneously published the proposed plan of distribution (“Proposed Plan”). The notice provides the public with 30 days to submit their comments on the Proposed Plan. See the Commission’s Notice: Release No. 34-96000 and the Proposed Plan.
On November 14, 2022, the Commission approved the Plan of Distribution. See Release No. 34-96310 and the Plan. The Plan provides for the transfer of the Fair Fund, less any investment fees incurred while held at the Commission, to the Distribution Fund established in the related civil action, SEC v. Donald S. LaGuardia, Jr., No. 19-cv-05895 (S.D.N.Y.), for distribution to harmed investors in accordance with a plan to be approved by the district court.
For more information, please contact the Commission:
Office of Distributions