Key Takeaways
- • Hatteras Investment Partners rejected a 20% liquidity haircut offered by secondary brokers in December 2019 and instead pursued an alternative solution that ultimately cost the funds approximately $300 million in losses.
- • The SEC censured Hatteras and CEO David B. Perkins on September 18, 2026, for violations of Section 206(2) of the Advisers Act under a negligence standard, with Perkins ordered to pay $250,000 in civil penalties; both parties settled without admitting findings.
- • The Hatteras Core Funds (a master fund and four feeders) had deteriorated from $1.5 billion in assets in 2014 to under $400 million by 2020, with redemption requests exceeding 50% of net asset value, forcing the board to seek liquidity solutions.
- • In March 2021, a former Hatteras managing director working for Beneficient—a private company claiming to offer liquidity solutions for alternative assets—approached Perkins with a proposal that became the subject of the SEC enforcement action.
- • The case exemplifies governance and operational due diligence failures: a single individual conducted due diligence alone, overrode qualified objections internally, and presented the recommendation to a board without independent verification capability.
Summary
The Hatteras Investment Partners enforcement action, finalized by the SEC in September 2026, represents a cautionary study in fund governance and decision-making under financial distress. The narrative begins in December 2019 when the board of the Hatteras Core Funds—consisting of a master fund and four feeder vehicles holding private and hedged investments—faced a liquidity crisis. Two independent secondary brokers independently assessed the portfolio and concluded that orderly liquidation would require approximately one year and carry a 20% haircut to net asset value. Rather than accept this outcome, the board rejected the proposal and instructed management to identify alternative solutions.
By that time, the fund complex had shrunk dramatically from $1.5 billion in assets in 2014 to under $400 million by 2020, with redemption requests representing more than half of net asset value. This combination of asset erosion and liquidity pressure created conditions where the board may have felt compelled to pursue higher-risk alternatives. In March 2021, a former Hatteras managing director, then employed in sales at Beneficient—a private company positioning itself as a liquidity provider for alternative assets—initiated contact with CEO David B. Perkins with a proposal.
The SEC's enforcement order, while not alleging fraud, identified critical governance and control deficiencies. The violation of Section 206(2) of the Advisers Act applied a negligence standard rather than an intent-to-defraud standard, focusing on process rather than motivation. The investigation revealed that a single individual conducted the due diligence evaluation independently, overrode the only qualified internal objection raised within the organization, and presented the findings to a board that lacked independent means to verify the analysis. This concentration of analytical responsibility without checks created the conditions under which the subsequent transaction—ultimately costing the funds approximately $300 million—proceeded without adequate scrutiny.
The enforcement order carries direct implications for alternative fund boards and operational due diligence practitioners. The case demonstrates that governance failures need not involve intentional misconduct to generate substantial losses and regulatory sanction. The $250,000 civil penalty against Perkins, combined with cease-and-desist orders, underscores the SEC's focus on adviser control and fiduciary process standards, particularly when alternative asset portfolios face liquidity pressures and internal expertise becomes concentrated in single decision-makers.
By that time, the fund complex had shrunk dramatically from $1.5 billion in assets in 2014 to under $400 million by 2020, with redemption requests representing more than half of net asset value. This combination of asset erosion and liquidity pressure created conditions where the board may have felt compelled to pursue higher-risk alternatives. In March 2021, a former Hatteras managing director, then employed in sales at Beneficient—a private company positioning itself as a liquidity provider for alternative assets—initiated contact with CEO David B. Perkins with a proposal.
The SEC's enforcement order, while not alleging fraud, identified critical governance and control deficiencies. The violation of Section 206(2) of the Advisers Act applied a negligence standard rather than an intent-to-defraud standard, focusing on process rather than motivation. The investigation revealed that a single individual conducted the due diligence evaluation independently, overrode the only qualified internal objection raised within the organization, and presented the findings to a board that lacked independent means to verify the analysis. This concentration of analytical responsibility without checks created the conditions under which the subsequent transaction—ultimately costing the funds approximately $300 million—proceeded without adequate scrutiny.
The enforcement order carries direct implications for alternative fund boards and operational due diligence practitioners. The case demonstrates that governance failures need not involve intentional misconduct to generate substantial losses and regulatory sanction. The $250,000 civil penalty against Perkins, combined with cease-and-desist orders, underscores the SEC's focus on adviser control and fiduciary process standards, particularly when alternative asset portfolios face liquidity pressures and internal expertise becomes concentrated in single decision-makers.
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