The allegations read: Plaintiff, securities and exchange commission, alleges the following against defendants, peter j. Decaprio and flowpoint partners, llc (flowpoint and collectively, defendants) that this is an enforcement action against investment advisers who made materially misleading statements to investors about an important safeguard for four private funds that they managed and advised (the funds). During the period from about july 2020 through late 2023, defendants misrepresented to investors that the funds were audited annually by an independent auditor. While defendants engaged an auditor to audit two of the four funds, that auditor did not produce any audit reports. Defendants did not correct their ongoing misstatements to investors despite knowing that the funds were not actually audited by the auditor they had engaged. Further, defendants breached their fiduciary duty to two of the funds they advised by failing to obtain annual audits for those two funds, as those funds' organizational documents required. By failing to operate those funds as they were required to be operated, defendants failed in their duty as investment advisers to those funds and operated a fraud on the funds. In addition, defendants failed to establish, maintain, and enforce a written policies and procedures document that they were legally required to have. Specifically, flowpoint failed to have policies designed to prevent the misuse of material nonpublic information by its business and persons associated with its business and decaprio was responsible for that failure. As a result of the defendants' violations of the securities laws, investors in the funds were led to believe that there was a safeguard in place surrounding their investments - a third party audit - that did not exist. As a result of the conduct alleged herein, defendants violated, or aided and abetted violations of, and unless restrained and enjoined will continue to violate, section 17(a)(2) of the securities act of 1933, sections 204a, 206(2) and 206(4) of the investment advisers act of 1940 and rule 206(4)-8 thereunder.
