SEC Settles Enforcement Proceeding Against Former Portfolio Manager over Prohibited Joint Transaction Involving Registered Closed-End Fund


The SEC settled administrative proceedings against Christopher B. Ruffle (the “Portfolio Manager”) over his role in causing The China Fund, Inc., a U.S. registered closed-end fund (the “Registered Fund”),  to engage in a securities transaction that benefited an affiliated hedge fund (the “Hedge Fund”).   At the time, the Portfolio Manager served as lead portfolio manager of both funds.   This article provides a brief description of the settlement order (the “Order”), whose findings the Portfolio Manager neither admitted nor denied.  The Order contains the same basic findings of fact as a 2012 settlement entered into by the affiliated registered investment advisers (the “Advisers”) that employed the Portfolio Manager and served as investment advisers to the Registered Fund and the Hedge Fund.  See the June 5, 2012 Financial Services Alert for a detailed description of the transaction the Order addresses.

In the Order, the SEC found  that the Portfolio Manager willfully aided, abetted, and caused violations by the Hedge Fund of Section 17(d) of the Investment Company Act of 1940 and Rule 17d-1 thereunder which prohibit an affiliated person of a registered investment company or any affiliated person of such affiliated person, from participating in any joint enterprise, other joint arrangement, or profit-sharing plan (a “joint  arrangement”) unless it obtains an order from the SEC permitting the joint arrangement.  As the basis for this determination, the SEC cited the fact that the Portfolio Manager knew that the transaction in question involved the specific benefit provided to the Hedge Fund “and knew (or was reckless in not knowing) that the transaction raised affiliation concerns.”

In addition to being subject to a cease and desist order, the Portfolio Manager is prohibited for 12 months from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter.  The Portfolio Manager also agreed to pay a $150,000 civil money penalty.

In the Matter of Christophe B. Ruffle, SEC Release No. ICA-31066 (June 2, 2104).

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.


Written by:

Published In:


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Goodwin Procter LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.