On September 18, 2026, the Securities and Exchange Commission instituted settled administrative and cease-and-desist proceedings against North Carolina-based registered investment adviser Hatteras Investment Partners, LP and its principal, David B. Perkins. According to the SEC, the firm and Perkins breached their fiduciary duties by steering several registered closed-end funds into a high-risk liquidation deal that ultimately cost the funds approximately $300 million.

Rather than delivering the cash exit that fund shareholders had been waiting for, the transaction left the funds holding plummeting stock they couldn’t immediately sell.

Why Hatteras Was Looking for an Exit

Hatteras served as the general partner and investment manager to the Hatteras Master Fund, LP and four related feeder funds (collectively referred to in the SEC order as the “Core Funds”). By 2020, those funds – which held portfolios of illiquid, alternative assets – had shrunk from roughly $1.5 billion in 2014 to under $400 million, and investor redemption requests had climbed past 50% of the funds’ net asset value (NAV).

With cash tight and investors looking to get out, the funds’ Board of Directors asked Hatteras to explore liquidation options that would allow the funds to wind down and distribute proceeds to shareholders.

Traditionally, liquidating a portfolio of illiquid private assets means selling them to institutional buyers on the secondary market at a discount. Instead, in 2021, Perkins and Hatteras recommended a very different pitch: exchanging the funds’ entire portfolios for preferred “B-2” shares in Beneficient, a private company that claimed to offer liquidity solutions for alternative asset holders.

Unlike secondary buyers, Beneficient offered to value the preferred shares at 100% of the Hatteras funds’ NAV. The plan was that once Beneficient went public, those preferred shares would convert into common stock, Hatteras would sell the stock on the open market, and shareholders would finally be redeemed in cash.

The board approved the transaction in December 2021. Everything hinged on how well Beneficient had been vetted – and whether the shares could actually be sold when the time came.

Missed Red Flags, an Overruled CFO, and a Surprise Lockup

According to the SEC’s order, Hatteras and Perkins failed to understand the true terms of the deal and overlooked glaring warning signs during due diligence:

  • Warnings in the Offering Documents: The SEC noted that Beneficient’s own offering materials prominently disclosed major risks. The company lacked a significant operating history or an established customer base; there was no public market for the preferred B-2 units (meaning holders might be stuck with them indefinitely); the B-2 units ranked junior to several other share classes for distributions; and no independent due diligence review had been conducted on Beneficient’s financial condition.
  • Accounting and Regulatory Red Flags: During negotiations, financial records showed that roughly 88% of Beneficient’s assets consisted of goodwill, alongside tens of millions of dollars in recent net losses. Worse yet, in November 2021—just weeks before Hatteras presented the deal to the board—Beneficient’s then-parent company (GWG Holdings) disclosed in an SEC filing that it was under an active SEC investigation related in part to Beneficient’s accounting practices and goodwill valuation, while restating over a year of financials to eliminate Beneficient’s previously reported interest income.
  • Overruling the Fractional CFO: According to the order, Perkins handled the due diligence almost entirely by himself. Recognizing that he was “not a CPA, not a CFA, not a financial analyst,” Perkins asked Hatteras’s fractional CFO in mid-November 2021 to examine Beneficient’s financials “with a fine tooth comb”. The CFO did so – and advised against the transaction, raising red flags about Beneficient’s earnings and the massive goodwill sitting on its balance sheet. Perkins moved forward with the deal anyway and told the board in December 2021 that Hatteras had completed thorough due diligence.
  • A Critical Lockup Mistake: While Perkins negotiated to make sure the Master Fund’s preferred shares were free from any contractual lockup restrictions, the SEC found that he misunderstood how regulatory lockups worked. When Beneficient finally went public through a SPAC merger on June 8, 2023, its stock price plunged more than 40% on the first day of trading. Only then did Perkins discover that the fund’s converted shares were locked up under a three-month regulatory restriction and could not be sold.

By the time the dust settled, the value of Beneficient’s shares had collapsed, resulting in losses of approximately $300 million to the Hatteras funds. The SEC concluded that Hatteras and Perkins lacked a reasonable basis to believe the deal was in the funds’ best interest or that it would actually deliver the liquidity shareholders needed.

The SEC Settlement

The SEC’s order finds that Hatteras Investment Partners and Perkins willfully violated Section 206(2) of the Investment Advisers Act of 1940, which prohibits practices that operate as a fraud or deceit upon clients (a provision that can be established by negligence).

Without admitting the SEC’s findings, Hatteras and Perkins consented to a cease-and-desist order and censures, and Perkins agreed to pay a $250,000 civil penalty in installments over the course of a year.

What This Means for Hatteras Fund Investors

For investors who suffered substantial losses in the Hatteras funds, a $250,000 regulatory penalty is a drop in the bucket compared to roughly $300 million in portfolio losses -and the SEC’s order does not establish a Fair Fund or restitution pool to compensate shareholders.

However, the SEC’s enforcement action against the fund manager is only one piece of the puzzle. Complex, illiquid closed-end funds like the Hatteras Core Funds were frequently pitched to individual investors and retirees by brokerage firms and registered financial advisors.

If a financial advisor or brokerage firm recommended or over-concentrated your portfolio in Hatteras funds, it is worth examining how that investment was sold to you in the first place:

  • Liquidity and Lockup Risks: Were you clearly told that the fund held illiquid private assets and that getting your cash out could take years -or might not happen when you needed it?
  • Suitability and Best Interest: Did a complex alternative fund actually fit your age, retirement timeline, risk tolerance, and cash-flow needs?
  • Portfolio Concentration: Was an excessive share of your retirement savings or liquid net worth placed into alternative investments?
  • Ongoing Supervision: Did your brokerage firm conduct proper due diligence on the fund and monitor the mounting redemption pressures and restructuring risks?

While the SEC’s order focuses on Hatteras and Perkins, brokerage firms have an independent duty to ensure that the investments they recommend are suitable and in their clients’ best interests. Because strict time limits and eligibility rules apply to FINRA arbitration and investment-loss claims, affected investors should have their accounts reviewed promptly.

Disclaimer: This article summarizes findings from a settled SEC administrative order. The respondents consented to the entry of the order without admitting the findings therein. This content is provided for general informational purposes only and does not constitute legal advice.

Official Sources