SEC Goes Easy On HeppleWhite Whistleblower

Nov 13 2013 | 9:30am ET

The Securities and Exchange Commission is showing its appreciation to a former hedge fund administrator who blew the whistle on his firm.

The SEC announced Tuesday there would be no significant enforcement action against Scott Herckis, who, although he aided and abetted the unlawful activity at his former employer—Berton M. Hochfeld's now-defunct HeppleWhite Fund—also told the SEC about the misconduct which cost investors $1.5 million.

The case marks the first time the SEC has negotiated a “deferred prosecution agreement” with an individual.

“We’re committed to rewarding proactive cooperation that helps us protect investors, however the most useful cooperators often aren’t innocent bystanders,” said Scott W. Friestad, an associate director at the SEC’s enforcement division,in a statement, adding that Herckis came forward “without any assurances of leniency.”

Herckis was the fund's administrator from December 2010 to September 2012 when he resigned and contacted the SEC.

For his role in the fraud, Herckis must return the fees he earned as administrator, roughly $50,000, and cannot serve as a fund administrator or provide services to hedge funds for five years. He will not be charged with aiding and abetting the fraud.

The SEC has already collected $6 million to compensate HeppleWhite investors.


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