206(4)-8 thereunder, among others. Although the SEC did not allege that Apex directly participated in any of ClearPath’s or EquityStar’s wrongful conduct, the SEC concluded that, as a result of Apex’s failure to act upon knowledge it possessed regarding both the ClearPath and EquityStar schemes, Apex was a cause of the investment managers’ violations of Sections 206(2) and 206(4) of the Advisers Act and Rule 206(4)-8 thereunder. SEC’s Message In charging Apex, the SEC is highlighting its expectation that fund administrators take affirmative action to ensure that fund records provide accurate information about the value and existence of fund assets. Indeed, SEC Division of Enforcement Director Andrew Ceresney explained that liability was specifically ascribed to Apex because “Apex failed to live up to its gatekeeper responsibility and essentially enabled the schemes to persist at each of these advisory firms until the SEC stepped in.” The SEC’s action against the fund administrator here should serve as a warning to all gatekeepers, including service providers, compliance professionals and auditors, that the SEC will use negligence-based securities laws to hold service providers responsible, especially where indications of fraud are ignored. Endnotes [1]Section 203(k) of the Investment Advisers Act of 1940 (Advisers Act), the provision under which the cease-and-desist actions were brought, allows the SEC to impose a cease-and-desist order upon any person that is, was, or would be a cause of another’s violation, due to an act or omission the person knew or should have known would contribute to such violation. [2] Section 206(2) of the Advisers Act prohibits any investment adviser from engaging in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client. Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder make it unlawful for any investment adviser to a pooled vehicle to make any untrue statement of a material fact or omit to state a material fact necessary to make the statements made not misleading, or otherwise engage in any act, practice or course of business that is fraudulent, deceptive or manipulative. © 2016 Perkins Coie LLP CONTACTS Keith Miller Martin E. Lybecker Jesse P.

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