Legal
Vicis Capital Partner Charged with Self-dealing in Client Trades
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The SEC has charged Shadron Stastney, a partner at hedge fund manager Vicis Capital, with breach of fiduciary duty by engineering the purchase of a basket of securities by a fund he managed and in which he maintained a financial interest. The SEC accused Stastney of trading as a principal when he agreed to pay a friend $7.5 million for a portfolio of illiquid securities that the friend was required to divest in order to join Vicis as a managing director. Stastney failed to disclose to the hedge fund’s limited partners that the portfolio included securities in which he held a personal interest and that he received more than $2 million of the proceeds from the sale. “Fund advisers cannot sit on both sides of a transaction as buyer and seller without the consent of the clients who rely on them for unbiased investment advice,” said Julie M. Riewe, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. “Stastney failed to live up to his fiduciary duty when he unilaterally set the terms of the transaction and authorized it without disclosing that he would personally profit from it.”
Under a settlement reached with the agency, Stastney will be barred from association with regulated investment professionals for 18 months, and will wind down the Vicis Capital Master Fund he manages. He will also pay $2.9 million in disgorgement and penalties.
