SEC Reaches First Deferred Prosecution Agreement With An Individual

The SEC has reached a deferred prosecution agreement with an individual in exchange for his help in bringing down a crooked hedge fund manager who stole investor assets and overstated the fund’s performance. This is a first for the agency and is in keeping with a new and aggressive enforcement policy outlined by Director Mary Jo White. The agreement was struck with Scott Herckis who, while working at Heppelwhite Fund LP as an administrator, helped the SEC bring an emergency enforcement action against founder and manager Berton Hockfeld, who had misappropriated more than $1.5 million from the fund.

Herckis won’t escape all penalties. Under the DPA Herckis must repay $50,000 in fees he received as administrator and is banned from working in the investment business for five years. ”We’re committed to rewarding proactive cooperation that helps us protect investors, however the most useful cooperators often aren’t innocent bystanders,” Scott Friestad, associate director in the SEC’s Division of Enforcement, said in a statement. “To balance these competing considerations, the DPA holds Herckis accountable for his misconduct but gives him significant credit for reporting the fraud and providing full cooperation without any assurances of leniency.”