SEC Charges Apex Fund Services with Gatekeeper Failures

The Securities and Exchange Commission (SEC) recently stated that Apex Fund Services has agreed to pay over $350,000 to settle charges relating to a failure to heed red flags and correct faulty accounting. The firm provided administrative services to private funds. The SEC determined that Apex missed or ignored clear indications of fraud while they were under contract to prepare financial statements and investor account statements for funds managed by ClearPath Wealth Management and EquityStar Capital Management. Both firms were charged with fraud by the SEC. Patrick Churchville, ClearPath’s owner, was also charged with fraud. ClearPath allegedly used Apex false reports and statements to communicate financial positions and performance to the ClearPath funds’ investors. The SEC also charged EquityStar and its owner, Steven Zoernack in March. Apex accounted for more than $1 million in undisclosed withdrawals by Zoernack from the EquityStar funds as receivables owed to the funds, and Apex sent monthly account statements to investors that it knew or should have known materially overstated the investors’ true holdings in the funds. Apex paid a total of $352,449, including disgorgement of $96,800 plus interest and a penalty of $75,000 for its role in the ClearPath fraud. It also agreed to pay disgorgement of $89,050 plus interest and a penalty of $75,000 for its role in the EquityStar fraud.

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