January 23, 2020 / 6:37 PM / 24 days ago

SEC probes Florida private lender over accounting questions

NEW YORK, Jan 23 (Reuters) - TCA Fund Management Group Corp, a Miami-area business lender that produced nearly a decade of virtually uninterrupted gains, is liquidating its main investment fund amidst a U.S. securities investigation related to its accounting practices, according to a client and documents reviewed by Reuters.

A TCA letter to investors on Tuesday said it was suspending clients’ access to cash as they had asked for more money than was available.

“In light of these redemption requests and the increasing illiquid nature of the Funds ... as well as issues relating to accounting and revenue recognition policies that have been raised in connection with an ongoing SEC investigation ... the Investment Manager has determined that the continued operation of the Funds is no longer commercially viable,” the letter said.

The letter, previously reported by Bloomberg here said the liquidation of the fund's positions would take "up to 12 to 18 months."

NBC News reported here on Wednesday that TCA employees had filed a whistleblower complaint with the U.S. Securities and Exchange Commission over the fund's accounting practices, saying its assets and returns were overstated.

A spokesman for the SEC declined to comment. TCA and its founder, Bob Press, did not respond to calls and emails from Reuters seeking comment.

TCA attorney Carl Schoeppl said in a statement to NBC News on Wednesday that TCA “treats this matter very seriously and has taken immediate steps to address the SEC whistleblower complaint by launching an internal investigation ... and has been in contact with the SEC and has offered full cooperation.”

Schoeppl did not respond to additional Reuters questions related to TCA.

Direct lenders like TCA make high-interest rate loans, usually to fledgling or struggling businesses passed over by banks. Despite risks here direct lending has attracted more interest from large investors like pensions and endowments as they seek investments not tied to from traditional bets like stocks and bonds.

A TCA fund investor contacted by Reuters said by email that the SEC investigation referred to in the letter was a “known issue with regards to internal processes for revenue recognition and has been referenced in previous auditor reports.”

A spokesman for TCA’s last known auditor, Grant Thornton, declined to comment.

Citing employee whistleblowers, NBC reported that Grant Thornton raised questions in 2019 about some of the fund’s 2018 figures and issued a qualified opinion.

The investor in contact with Reuters said TCA was soliciting additional money for the troubled fund in November and December by offering fee discounts.

A TCA marketing email sent to another prospective investor in December, seen by Reuters, said the TCA Global Credit Master Fund, launched in 2010, targets net annual returns of 8% to 12%. It also noted gains every month between January 2017 and November 2019, with annual returns of 8.12% in 2017, 8.75% in 2018 and 7.07% in 2019 through November.

Reuters reported in July 2017 that the same fund had produced nearly 90 straight months of positive returns here

The current accounting questions are not the first faced by TCA.

In June 2015, accounting firm BDO International issued a qualified opinion for its 2014 audit of the TCA Global Credit Fund, LP. The firm noted, in a report seen by Reuters, that it was unable to obtain “sufficient, appropriate audit evidence” to support assumptions on more than $9 million in loans; that certain investment banking and service fees charged to borrowers were not in accordance with international accounting standards; and that it was unable to verify a valuation analysis of past loans.

A spokeswoman for BDO declined to comment.

Reporting by Lawrence Delevingne. Editing by Michelle Price and Bill Berkrot

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