Article: SEC Brings Fraud Charges Against Another Hedge Fund

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SEC Brings Fraud Charges Against Another Hedge Fund

Stephen Taub, 25 October 2010

Another day, another hedge fund accused of wrong-doing by regulators.

The Securities and Exchange Commission Monday charged hedge fund manager Stephen M. Hicks and his investment advisory businesses with defrauding investors in funds managed by Southridge Capital Management LLC and Southridge Advisors LLC by overvaluing the largest position held by the funds. The SEC also alleges that Ridgefield, Ct.-based Hicks “made material misrepresentations” and misused investor money to pay legal and administrative expenses of other funds managed by Hicks and Southridge.

This is the SEC’s third case brought against a hedge fund this month alone. It is also yet another case in which the hedge fund that committed fraud was smaller than $150 million, the threshold required to register under Dodd-Frank.

Hicks founded Southridge Capital in 1996. In 2003, it managed five hedge funds: Sovereign Partners, L.P., Dominion Capital Fund Ltd., Dominion Investment Fund LLC, Southridge Partners L.P. and Southshore Capital Fund Ltd. The funds mostly invested in private investments in public equity (PIPEs) with micro-cap issuers.

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