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Regulation and Compliance > Federal Regulation > SEC

SEC Accuses Firm of Marketing Rule Violations, Failing to Register

By Dinah Wisenberg Brin

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The Securities and Exchange Commission has accused Black Dragon Investment Management, its CEO and a related business with failing to register as investment advisors and with violating the commission’s marketing rule by posting misleading performance data.

Black Dragon and CEO Louis Hernandez Jr. have agreed, without admitting or denying the allegations and subject to court approval, to pay civil penalties and to be permanently enjoined from violating the charged provisions of U.S. securities laws, the SEC announced Tuesday.

The SEC’s complaint, filed the same day, alleges that from at least December 2021 to March 2024, Florida-based Black Dragon and Hernandez improperly failed to register as investment advisors with the U.S. agency.

The SEC also alleges that the defendants provided misleading performance information in the firm’s marketing materials and on its website, and failed to maintain certain related books and records, among other violations.

The civil complaint, filed in U.S. District Court for the Southern District of Florida, charges Black Dragon and Hernandez with violating various Advisers Act provisions.

Neither the firm nor Hernandez immediately responded to LinkedIn messages nor to a request for comment sent in a form on Black Dragon’s website.

The firm and Hernandez have served private fund clients since 2014, according to the complaint. From at least December 2021, they managed private funds that, according to their calculations, held over $188 million in assets, the SEC says.

Despite having over $150 million in regulatory assets under management, Black Dragon improperly continued to rely on the private fund advisor exemption for the next couple of years, the suit alleges.

Black Dragon ultimately applied to register as investment advisors by filing an umbrella registration on Form ADV with the commission in April, the SEC says.

The firm and Hernandez also violated the SEC’s compliance rule by failing to enforce firm compliance policies and procedures, and by failing to conduct an annual compliance review, the SEC alleges, also contending that Black Dragon violated its own code of ethics included in its compliance manual.

Image: Diego M. Radzinschi/ALM

Dinah Wisenberg Brin

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