Monsoon Capital, an investment adviser specializing in Indian real estate and private equity markets, has been sanctioned by the Securities and Exchange Commission, according to a cease-and-desist order issued by the SEC on April 30, 2020. At the center of this case is Gautam Prakash, the founder, owner, senior managing director, and chief compliance officer for Monsoon. What exactly happened? Gautam Prakash borrowed $1 million from an investment fund and used the money for his personal expenses. Read on to learn more.
What is Monsoon Capital? Monsoon Capital is an investment adviser that has been registered with the SEC since July 2005. Its managed private funds and separately managed accounts focus on investing in Indian real estate and private equity markets. It had $154 million in assets under management (AUM) as of December 2019. Its feeder fund, Monsoon Infrastructure & Realty Co-Invest, L.P., is a limited partnership formed in 2007.
Who is Gautam Prakash? As mentioned above, Gautam Prakash is the owner, senior managing director, and chief compliance officer of Monsoon Capital. In June 2017, he borrowed $1 million from Monsoon Infrastructure & Realty Co-Invest, L.P. (MIRC) to settle a trade in a personal account in India. Even after three MIRC employees told him this would constitute a breach of fiduciary duty, he went ahead and did it anyway. He returned the loan five days later and disclosed the loan in a December 31, 2018 audit.
As a result of Gautam Prakash’s actions, the SEC has determined that Monsoon Capital and Gautam Prakash violated the Investment Advisers Act of 1940. Specifically, they violated the following provisions:
- Section 206(1) of the Advisers Act, which forbids investment advisers from using schemes or artifices to defraud clients or prospective clients
- Section 206(2) of the Advisers Act, which makes it unlawful for investment advisers to engage in any course of business which operates as a fraud or deceit upon clients or prospective clients
- Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder, which makes it unlawful for an investment adviser to make any untrue statement of a material fact
In response to the cease-and-desist proceedings instituted against it, Monsoon Capital has offered the SEC Offers of Settlement, which the SEC has determined it will accept. What consequences has Gautam Prakash faced as a result of his actions? The SEC has barred Gautam Prakash from associating with an “investment adviser, broker, dealer, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization,” according to the cease-and-desist order. He is also prohibited from “serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter,” according to the cease-and-desist order. Monsoon Capital and Gautam Prakash have also been ordered to pay a civil monetary penalty of $100,000.
If you have questions or concerns about Monsoon Capital, Monsoon Infrastructure & Realty Co-Invest, or Gautam Prakash, don’t hesitate to contact the securities attorneys of Fitapelli Kurta. Call (877) 238-4175 or email email@example.com for your free case consultation.