The Trial Balance is CFO.com’s weekly preview of stories, stats and events to help you prepare.
Part 1 — The head of a New York hedge fund advising firm faces SEC charges
A New York hedge fund advisory and its CEO have been charged with concealing hundreds of millions of dollars of losses from investors.
The Securities and Exchange Commission announced the charges against Prophecy Asset Management on Sept. 29.
Between 2014 and 2020, the firm raised $500 million for hedge funds it advised and led investors “to believe that their investments were protected from loss,” according to the SEC. The complaint went on to say that Prophecy Asset Management and CEO and Chief Investment Officer Jeffrey Spotts told investors the funds’ capital was “allocated among dozens of sub-advisers who traded in liquid securities and posted cash collateral to offset any trading losses they incurred,” SEC officials said in a news release.
Instead, however, most of the funds’ capital went to Prophecy Asset Management’s largest sub-adviser, Brian Kahn, according to the SEC.
“As alleged, Prophecy Asset Management, Spotts, and the company’s Chief Compliance Officer, John Hughes, worked with Kahn to deceive the funds’ auditor and administrator – and, in turn, investors – through fabricated documents and engaging in a series of sham transactions to cover up the true financial condition of the funds,” the SEC said in the release.
After fund losses surpassed $350 million in March 2020, Prophecy Asset Management indefinitely suspended redemptions by investors, the commission said.
SEC officials noted the U.S. Attorney’s Office for the District of New Jersey has also announced criminal charges against Spotts.
The SEC in 2023 charged Hughes for his involvement in the alleged fraud and said he failed to live up to his “important gatekeeping role and owed fiduciary duties to his clients.”
Part 2 — This week
Here’s a list of important market events slated for the week ahead. Note: Economic reports may be delayed due to the government shutdown.
Monday, Oct. 6 — None scheduled.
Tuesday, Oct. 7
- U.S. trade deficit, Aug.
- Consumer credit, Aug.
Wednesday, Oct. 8
- Minutes of Fed’s FOMC meeting, Sept. 16-17
Thursday, Oct. 9
- Initial jobless claims, week ending Oct. 4 — delayed due to government shutdown
- Wholesale inventories
Friday, Oct. 10
- University of Michigan Consumer Sentiment, September — Preliminary
- Monthly U.S. federal budget, Sept.
Part 3 — Weekly listen: Lessons from going from CPA to CFO
Joe LaPolla, CFO of integrated oil and gas pipeline contractor Driver Pipeline, joined Beyond the Ledger podcast host Troy Ashby for a candid discussion about his career journey from public accounting to the top finance spot. LaPolla shared how he knew it was time to move into a new role, the benefits of stepping out of your comfort zone and overcoming the feeling of imposter syndrome as a first-time finance chief.
When asked what piece of advice he would offer to someone who’s five to 10 years behind him in their career journey, he offered: “Learn what your boss cares about and maybe what your boss’s boss cares about. At times in my career, I figured opportunity would just come by doing a good job of the things that have been assigned to me. But you [have to] ask sometimes for more opportunity or for a new role or to take on new responsibility, and that starts with understanding: What does your boss care about?”
