Apex pays $350k to settle SEC charges

Fund administration provider Apex Fund Services has agreed to pay more than $350,000 to settle US Securities and Exchange Commission charges alleging that it missed or ignored signs of faulty accounting by two of its clients, according to an SEC statement.

The regulator said in its statement that Apex had failed to recognize “clear indications of fraud” as a gatekeeper responsible for record-keeping and preparing financial statements and investor account statements for funds managed by ClearPath Wealth Management and EquityStar Capital Management.

Apex spokeswoman Rosie Guest said Apex did not admit or deny the SEC’s historical findings but said the firm was satisfied with the resolution of the investigation and was committed to full compliance with global legal and regulatory requirements.

The firm agreed to pay a total $352,449 to settle the case, the SEC said. That amount includes $96,800 of disgorgement plus $8,813 interest and a $75,000 penalty for charges related to ClearPath, plus $89,050 in disgorgement, $7,786 interest and a $75,000 penalty for the EquityStar-related charges.

With ClearPath, which was charged last year, the SEC found that Apex did not take appropriate actions after discovering undisclosed brokerage and bank accounts, undisclosed margin and loan agreements and inter-series and inter-fund transfers that violated fund offering documents. It also said Apex failed to make corrections on previously-issued accounting reports and continued making materially false reports, which were then used by ClearPath to communicate with its investors.

Regarding EquityStar, which the SEC charged in March,the regulator found that Apex labelled more than $1 million in undisclosed withdrawals by EquityStar owner Steven Zoernack from EquityStar funds as receivables owed to the funds, even though there was no evidence that Zoernack could or would repay those withdrawals. According to the SEC, this amount grew to more than half of the net asset value of one EquityStar fund and more than a quarter of another. The SEC also found that Apex sent monthly account statements to investors that it knew or should have known materially overstated their true holdings in those funds.

“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,” SEC division of enforcement director Andrew Ceresney said in a statement. “Fund administrators are responsible for ensuring that fund records provide accurate information about the value and existence of fund assets.”