SEC VERIFY DATA
Federal action over fund due care. Learn how deal review, liquidity planning, board duty, valuation and manager judgment can alter investor outcome.
ALTERNATIVE FUND REVIEW
A federal order in Sep 2026 put adviser judgment under review. The matter can help explain why deal review, liquidity planning, valuation work, board duty and manager control all matter when a fund need to exit hard-to-trade holdings. A public record may confirm an adviser role, yet it cannot alone prove that every major deal received enough independent review.
https://www.sec.gov/enforcement-litigation/administrative-proceedings/34-106418-s
On September 18, 2026, the U.S. Securities and Exchange Commission instituted settled administrative and cease-and-desist proceedings against Hatteras Investment Partners, LP, a North Carolina-based registered investment adviser, and its CEO and co-founder David B. Perkins. The SEC found that Hatteras and Perkins breached fiduciary duties in connection with a transaction designed to provide liquidity to several registered funds holding illiquid alternative assets. According to the order, the funds exchanged their portfolios for preferred shares of Beneficient, with the expectation that the shares could later be sold after Beneficient became public and the resulting cash could be distributed to fund shareholders. The strategy failed to deliver the intended liquidity, and the SEC order states that the funds ultimately suffered losses of approximately $300 million.
WHY THIS CASE IS DIFFERENT
The Hatteras matter is important because it is not primarily about fake filings, fictitious assets or a newly created online investment platform. Hatteras had been registered with the SEC since 2004, managed registered closed-end funds and other pooled investment vehicles, and reported approximately $114.7 million in assets under management on its March 30, 2026 Form ADV. The SEC order also states that Hatteras and Perkins had no prior disciplinary history.
That makes the case useful for a different type of investor due diligence. A manager can have a long regulatory history, established fund structures and an experienced principal yet still face serious questions about how a specific transaction was evaluated.
The core issue in the SEC order is therefore process: whether Hatteras and Perkins had a reasonable basis for recommending a complex liquidity transaction and whether they adequately investigated information that raised concerns before recommending the deal to the funds' board.
FROM A $1.5 BILLION PLATFORM TO A LIQUIDITY PROBLEM
According to the SEC order, the registered funds involved in the transaction had once grown substantially but later faced declining assets and increasing redemption pressure. Their assets under management fell from approximately $1.5 billion in 2014 to under $400 million by 2020, while tender requests eventually exceeded 50% of net asset value.
The board therefore asked Hatteras to explore liquidation alternatives that could distribute proceeds to shareholders and ultimately terminate the funds.
In late 2019, Hatteras presented proposals from two established secondary-market brokers. According to the SEC, both proposals contemplated selling the illiquid portfolios at approximately a 20% discount to NAV and taking nearly a year to complete.
The board did not accept those proposals and instead sought another solution.
That decision created a familiar private-markets dilemma: accept an immediate discount for liquidity or search for a structure that might preserve more headline value.
BENEFICIENT OFFERED A DIFFERENT ROUTE
In 2021, Hatteras began negotiating with Beneficient, then a private company that promoted liquidity solutions for holders of alternative assets.
Under the eventual structure described by the SEC, a master fund would exchange its portfolio of illiquid alternative investments for Beneficient preferred B-2 shares. Once Beneficient became public, those preferred shares were expected to convert into common stock that could then be sold, allowing the funds to distribute cash to shareholders.
Unlike the secondary-market proposals that contemplated an approximately 20% haircut, the Beneficient structure valued the preferred shares at the funds' full NAV.
That difference is significant.
A transaction that appears to preserve full NAV can look economically superior to a discounted secondary sale. But full stated value is only meaningful if the replacement asset can actually be monetized at or near that value within the required time frame.
That became the central risk.
RED FLAGS WERE ALREADY VISIBLE
The SEC order describes several warning signs that emerged during the negotiations.
Beneficient had reported that approximately 88% of its assets were attributable to goodwill. The SEC also states that the company had generated net losses of approximately $50.9 million and $167.3 million in the prior two years.
The offering material for the preferred B-2 units identified additional risks. According to the SEC order, Beneficient lacked a significant operating history and established customer base; there was no public market for the preferred units; investors could be required to hold them indefinitely; the B-2 units ranked behind other classes for distributions; no independent due-diligence review of Beneficient had been performed; and substantial goodwill and intangible assets could later require write-downs.
These are not minor technical issues. They go directly to liquidity, valuation and capital structure.
A fund seeking to solve a liquidity problem by exchanging illiquid assets for another security should examine whether the replacement asset is genuinely more liquid, whether its valuation is defensible and whether the fund understands all transfer or lock-up restrictions.
THE GWG CONNECTION ADDED ANOTHER LAYER
At the time Hatteras was evaluating Beneficient, Beneficient was linked to GWG Holdings, Inc.
The SEC order states that GWG filed its 2020 Form 10-K in November 2021 and disclosed an ongoing SEC investigation relating in part to Beneficient's accounting practices and goodwill valuation. GWG also restated prior consolidated financial statements, eliminating previously reported interest income associated with Beneficient.
According to the SEC, Perkins continued toward the transaction despite these developments.
This is an important due-diligence point because a red flag does not need to prove wrongdoing before it becomes relevant. The role of investment due diligence is to identify information that changes the level of investigation required.
When accounting questions, goodwill concentration and regulatory scrutiny appear at the same time, additional independent verification may be warranted even if management remains optimistic.
THE FRACTIONAL CFO WARNING
One of the most striking details in the SEC order involves Hatteras's Fractional CFO.
According to the SEC, Perkins asked the CFO to review Beneficient's financial statements closely. After doing so, the CFO voiced opposition to the transaction, citing concerns about Beneficient's earnings and the amount of goodwill on its balance sheet.
Perkins proceeded with the deal.
The SEC also found that Perkins conducted Hatteras's due diligence on Beneficient almost entirely on his own, although outside counsel participated in meetings regarding deal mechanics and Investment Company Act issues.
This creates a broader governance lesson.
Independent or semi-independent internal specialists can provide valuable challenge when a transaction is unusually complex. If a CFO, risk officer, valuation expert or outside adviser raises a material concern, the diligence record should show how that concern was evaluated and resolved.
Ignoring an internal objection is different from analyzing it and documenting why management reached a different conclusion.
THE LOCK-UP PROBLEM CHANGED THE LIQUIDITY OUTCOME
Another important issue involved the expected ability to sell Beneficient shares after the company went public.
According to the SEC order, Perkins believed the preferred shares were free from contractual lock-up restrictions and incorrectly assumed they would also avoid a regulatory lock-up.
After Beneficient completed a business combination with Avalon Acquisition, Inc. in June 2023, the preferred B-2 units converted into Beneficient Class A common stock.
The SEC states that Beneficient's share price fell by more than 40% on its first day of public trading.
At that point, Perkins discovered that the fund's shares were subject to a three-month regulatory lock-up and could not immediately be sold.
That distinction between contractual restrictions and regulatory restrictions is critical.
A liquidity strategy can fail even if an agreement does not contain a contractual lock-up when securities-law restrictions independently prevent immediate resale.
Private-fund managers evaluating exit transactions should therefore analyze the full legal path to liquidity, not merely the transaction contract.
GOODWILL WRITE-DOWNS AND THE $300 MILLION LOSS
The SEC order states that Beneficient later wrote down more than $2 billion of goodwill as its share price continued to decline.
The funds suffered approximately $300 million in losses.
The severity of the outcome does not by itself prove that the original investment recommendation was improper. Investment decisions can produce large losses even when made through a reasonable process.
The SEC's finding instead focuses on the quality of that process.
According to the Commission, Hatteras and Perkins failed to fully appreciate the risks of Beneficient and the transaction, did not adequately review the offering material and failed to perform additional due diligence after concerns were raised.
That distinction matters in adviser analysis. The relevant question is not merely whether an investment lost money. It is whether the adviser had a reasonable basis for believing the recommendation served client interests when the recommendation was made.
THE TRANSACTION ALSO FAILED TO COMPLETE THE FUND LIQUIDATION
The SEC order identifies another problem that is easy to miss if attention is focused only on the stock-price loss.
The transaction was supposed to help liquidate and terminate the funds.
However, the agreement allowed Beneficient to receive economic rights relating to the underlying portfolio funds before all ownership transfers had been completed. Transfer approvals from underlying portfolio funds were still required.
According to the SEC, three years after Beneficient became public, the core funds remained in a plan of liquidation and the master fund still could not deregister or terminate because it continued to hold the underlying portfolio-fund interests.
This illustrates a major private-market operational risk.
A transaction can appear economically complete while legal title, transfer approvals and fund termination remain unresolved.
Investors and boards therefore need to evaluate not only economic consideration but also the mechanics required to complete every underlying transfer.
REGISTERED STATUS DID NOT REMOVE TRANSACTION RISK
Hatteras had a long regulatory history and was a registered investment adviser.
That did not eliminate deal-specific risk.
This is useful for investors because legitimacy checks and investment-process checks answer different questions.
Registration can establish the adviser's regulatory status. Form ADV can provide ownership, AUM, service-provider and disciplinary information. But those records do not independently prove that every future transaction will be well structured or adequately diligenced.
Due diligence therefore has at least two layers.
The first examines the manager.
The second examines the transaction.
A manager can pass the first layer and still require intensive review at the second.
WHAT INVESTORS CAN LEARN FROM THE HATTERAS ORDER
The Hatteras order provides a practical framework for evaluating alternative-asset liquidity transactions.
First, understand why the transaction is being pursued. If a fund faces heavy redemption pressure, urgency can affect decision-making.
Second, compare the proposed solution with realistic alternatives. A discounted secondary sale may appear unattractive, but a structure promising full NAV may carry additional valuation, execution or counterparty risk.
Third, verify the replacement asset. Exchanging one illiquid portfolio for another instrument does not automatically create liquidity.
Fourth, identify every restriction on resale, including contractual, regulatory and structural restrictions.
Fifth, investigate the counterparty's financial condition, capital structure, goodwill, operating history and regulatory disclosures.
Sixth, document internal objections and explain how they were resolved.
Finally, verify whether the transaction can legally and operationally achieve the stated objective, including all transfer approvals and fund-termination steps.
FILINGDOSSIER INDEPENDENT ANALYSIS
The Hatteras matter stands apart from many enforcement cases because the central issue is not whether an investment entity existed or whether a regulatory filing was fabricated. The SEC focused on fiduciary process, transaction understanding and the adequacy of adviser due diligence.
That makes the case especially relevant to established private-market managers.
A sophisticated adviser can face pressure to solve an illiquidity problem while preserving NAV. A transaction promising both liquidity and full value can appear more attractive than a conventional secondary sale at a discount. But the more attractive the solution appears, the more important it becomes to test the assumptions supporting it.
In this case, the SEC found that important warning signs existed before the transaction closed: heavy goodwill, substantial prior losses, accounting concerns, limited operating history, lack of a public market, junior security status and internal opposition from Hatteras's CFO.
The eventual approximately $300 million loss makes the case notable, but the more important research lesson is procedural.
Good investment due diligence should survive scrutiny before the outcome is known.
The adviser should be able to demonstrate why the transaction made sense based on information available at the time, how material risks were tested and why contrary evidence did not change the recommendation.
The SEC found that Hatteras and Perkins did not meet that standard.
SETTLEMENT AND REGULATORY OUTCOME
The SEC found that Hatteras and Perkins willfully violated Section 206(2) of the Investment Advisers Act of 1940.
Without admitting or denying the SEC's findings, except as specified in the order, Hatteras and Perkins agreed to cease-and-desist relief and censures.
Perkins also agreed to pay a civil monetary penalty of $250,000.
The proceeding was resolved through a settled administrative order rather than a contested court judgment.
That distinction is important when describing the case. The SEC order contains Commission findings entered as part of an accepted settlement, while Hatteras and Perkins did not admit those findings.
KEY FINDINGS
The SEC entered a settled order involving Hatteras Investment Partners, LP and David B. Perkins on September 18, 2026.
Hatteras had been registered with the SEC since 2004.
Its March 30, 2026 Form ADV reported approximately $114.7 million in assets under management.
The relevant registered funds had declined from approximately $1.5 billion in assets in 2014 to under $400 million by 2020.
Tender requests exceeded 50% of NAV.
Two earlier secondary-market proposals contemplated approximately a 20% discount and nearly one year to liquidate.
Hatteras instead recommended a transaction exchanging illiquid alternative assets for Beneficient preferred B-2 shares.
The SEC order states that 88% of Beneficient's assets were attributable to goodwill during the diligence period.
Beneficient had recorded net losses of approximately $50.9 million and $167.3 million in the prior two years.
Hatteras's Fractional CFO opposed the transaction after reviewing Beneficient's financial information.
Beneficient became public through a SPAC combination in June 2023.
Its shares fell more than 40% on the first day of public trading.
The fund's shares were subject to a three-month regulatory lock-up.
Beneficient later wrote down more than $2 billion of goodwill.
The registered funds suffered approximately $300 million in losses.
The SEC found that Hatteras and Perkins lacked a reasonable basis to conclude that the transaction would serve the funds' interests or provide the intended liquidity.
SEC SNAPSHOT
Respondent: Hatteras Investment Partners, LP Individual Respondent: David B. Perkins SEC Action Date: September 18, 2026 Administrative File Number: 3-22735 Exchange Act Release: 34-106418 Investment Advisers Act Release: IA-6997 Adviser Location: Raleigh, North Carolina SEC Registration History: Registered since 2004 Reported AUM on March 30, 2026: Approximately $114.7 million Transaction Counterparty: Beneficient Transaction Objective: Liquidity and eventual liquidation of registered funds Approximate Fund Loss: $300 million Beneficient First-Day Public Share Decline: More than 40% Goodwill Write-Down Referenced by SEC: More than $2 billion Primary Violation Found: Investment Advisers Act Section 206(2) Civil Penalty Paid by Perkins: $250,000 Resolution: Settled administrative and cease-and-desist order Admission Status: Respondents settled without admitting the SEC findings, except as stated in the order Primary Research Lesson: Adviser registration does not replace transaction-level due diligence