UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

INVESTMENT ADVISERS ACT OF 1940

Release No. 6438 / September 28, 2023

ACCOUNTING AND AUDITING ENFORCEMENT 

Release No. 4464 / September 28, 2023

ADMINISTRATIVE PROCEEDING

File No. 3-21750

In the Matter of

FOREPONT CAPITAL LLC,

Respondent.

ORDER INSTITUTING 

ADMINISTRATIVE AND CEASE-ANDDESIST PROCEEDINGS PURSUANT TO

SECTIONS 203(e) AND 203(k) OF THE 

INVESTMENT ADVISERS ACT OF 1940, 

MAKING FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS AND A 

CEASE-AND-DESIST ORDER 

I.

The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 

public interest that public administrative and cease-and-desist proceedings be, and hereby are, 

instituted pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 

(“Advisers Act”) against Forepont Capital LLC (“Forepont,” or the “Respondent”). 

II.

In anticipation of the institution of these proceedings, the Respondent has submitted an 

Offer of Settlement (“Offer”) which the Commission has determined to accept. Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings 

herein, except as to the Commission’s jurisdiction over it and the subject matter of these 

proceedings, which are admitted, the Respondent consents to the entry of this Order Instituting

Administrative and Cease-and-Desist Proceedings Pursuant to Sections 203(e) and 203(k) of the

Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions and a

Cease-and-Desist Order (“Order”), as set forth below. 
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III.

On the basis of this Order and the Respondent’s Offer, the Commission finds that:

Summary

1. Forepont is a registered investment adviser and committed multiple violations of 

the Advisers Act with respect to the two private funds that it advised. First, Forepont failed to 

timely distribute annual audited financial statements prepared in accordance with generally 

accepted accounting principles (“GAAP”) to the investors in the two private funds for fiscal 

years 2020 and 2021, resulting in violations of Section 206(4) of the Advisers Act and Rule 

206(4)-2 thereunder, commonly referred to as the “custody rule.”

2. Second, Forepont engaged in principal transactions with one of the two private 

funds without disclosing to its client, the fund, in writing prior to completion of the transactions 

that Forepont was acting as principal and without obtaining the client’s consent to the transactions. 

In March 2021, Forepont arranged for transfers to the fund, retroactive to the fund’s inception on 

September 30, 2020, of multiple securities held by two Forepont officers and co-owners and a third

senior associated person: (1) its chief executive officer (“CEO”), who was also its chief investment 

officer (“CIO”) and a co-owner; (2) its chief financial officer (“CFO”), who was also its chief 

compliance officer (“CCO”) and a co-owner; and (3) one of Forepont’s venture partners. In 

exchange, the three individuals received equity interests in the fund. Because these three 

individuals were officers, owners and/or senior associated persons of Forepont, these transfers 

constituted principal transactions between Forepont and the fund and therefore required Forepont 

to provide the requisite written disclosure to, and obtain prior consent from, the fund. Forepont 

failed to do so, resulting in violations of Section 206(3) of the Advisers Act.

3. Third, the transferred assets included securities of a company whose CEO and cofounder is the brother of Forepont’s CEO and securities of a company whose founder, chairman of 

the board, and chief innovation officer is the Forepont venture partner whose securities were also

transferred to the fund. In addition, all the securities transferred to the fund for purposes of these 

in-kind exchanges had been acquired by the individuals prior to September 30, 2020 but were 

transferred to the fund at the individuals’ purported cost basis in those securities. Because 

Forepont did not provide advance disclosure to the fund of these material facts concerning the 

transfers and the associated conflicts of interest or the relationships between Forepont and the 

individuals whose securities were transferred to the fund, Forepont also violated its fiduciary duty 

to its client and thereby violated Section 206(2) of the Advisers Act in connection with these 

retroactive transfers. 

4. Finally, Forepont also failed to adopt and implement written policies and 

procedures reasonably designed to prevent violations of the Advisers Act and the rules thereunder, 

resulting in a violation of Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder, 

commonly referred to as the “compliance rule.” 
3

Respondent

5. Forepont is a Delaware limited liability company with its principal office and place 

of business in White Plains, New York. Forepont has been registered with the Commission as an 

investment adviser since May 2020. According to Forepont’s Form ADV filed in March 2023, it 

has approximately $82 million in regulatory assets under management in two pooled investment 

vehicles. 

Facts

Background

6. During the relevant period, a Forepont affiliate was the general partner of, and

Forepont served as investment adviser for, Forepont Capital Partners Fund 2, L.P (“Cayman 

Fund”). Forepont also served as investment adviser and investment manager for Forepont Capital 

Partners Fund II FPCI (“French Fund”), a private equity fund organized under the laws of France. 

As investment manager of the French Fund, Forepont had the authority to obtain possession of, or 

had access to, the French Fund’s funds and securities. The stated investment strategy for both 

funds focused on equity investments in pharmaceutical, biotech, life-sciences, and technology 

startups. 

Custody Rule Failures

7. The custody rule is designed to protect investment advisory clients from the misuse 

or misappropriation of their funds and securities. It requires that registered advisers who have 

custody of client funds or securities implement an enumerated set of requirements to prevent loss, 

misuse, or misappropriation of those assets. 

8. An investment adviser has custody of client assets if it or a related person holds, 

directly or indirectly, client funds or securities, or if it has the ability to obtain possession of, or has 

access to, those assets, including, among other things, by acting as a managing member of a limited 

liability company, a general partner of a limited partnership or a comparable position for another 

type of pooled investment vehicle. See Rule 206(4)-2(d)(2). Because an affiliate of Forepont was

the general partner of the Cayman Fund and Forepont was the investment manager of the French 

Fund, Forepont had custody of the assets of the two funds as defined in Rule 206(4)-2.

 

9. A registered investment adviser who has custody of client assets must, among other 

things: (1) ensure that a qualified custodian maintains the client assets; (2) notify the client in 

writing of accounts opened by the adviser at a qualified custodian on the client’s behalf; (3) have a 

reasonable basis for believing that the qualified custodian sends account statements at least 

quarterly to clients, except if the client is a limited liability company or a limited partnership for 

which the adviser or a related person is a managing member, general partner, or comparable 

position for another type of pooled investment vehicle, the account statements must be sent to each 

member or limited partner; and (4) ensure that client funds and securities are verified by actual 
4

examination each year by an independent public accountant at a time chosen by the accountant 

without prior notice or announcement to the adviser. See Rule 206(4)-2(a)(1)-(4).

10. The custody rule provides an alternative to complying with the requirements of 

Rule 206(4)-2(a)(2), (3), and (4) for investment advisers to limited liability companies, limited 

partnerships or other types of pooled investment vehicles, such as the two Forepont funds at issue. 

The custody rule provides that an investment adviser “shall be deemed to have complied with” the 

independent verification requirement and is not required to satisfy the notification and accounts 

statements delivery requirements with respect to a fund if the fund is subject to audit at least 

annually and “distributes [the fund’s] audited financial statements prepared in accordance with 

generally accepted accounting principles to all limited partners (or members . . .) within 120 days 

of the end of [the fund’s] fiscal year” (“Audited Financials Alternative”). See Rule 206(4)-2(b)(4). 

The accountant performing the audit must be an independent public accountant that is registered 

with, and subject to regular inspection by, the Public Company Accounting Oversight Board 

(“PCAOB”). See Rule 206(4)-2(b)(4)(ii). An investment adviser to a limited liability company or 

limited partnership that fails to meet the requirements of the Audited Financials Alternative to 

timely distribute audited financial statements prepared in accordance with GAAP would need to 

satisfy all of the requirements of Rules 206(4)-2(a)(2), (3), and (4) in order to avoid violating the 

custody rule.

11. While Forepont stated in its relevant Forms ADV that it was relying on the Audited 

Financials Alternative to comply with the custody rule, Forepont did not satisfy the requirements 

of the Audited Financials Alternative with respect to either of the two funds. Forepont engaged an

independent, PCAOB-registered accounting firm to conduct an annual audit of the financial 

statements of the French Fund and Cayman Fund for fiscal years 2020 and 2021, but the audit firm 

did not complete the audits and issue audit reports until well after 120 days following the end of 

both years. Accordingly, audited financial statements were not distributed by Forepont to the

investors in the two funds until long after 120 days of the end of the respective fiscal years, as set 

forth in the table below:

Fund End of Fiscal 

Year

Date Distribution 

Required

Date Distributed Days 

Late

French Fund December 31, 

2020

April 30, 2021 December 14, 

2022

593 days

Cayman 

Fund

December 31, 

2020

April 30, 2021 December 14, 

2022

593 days

French Fund December 31, 

2021

April 30, 2022 December 14, 

2022

229 days

Cayman 

Fund

December 31, 

2021

April 30, 2022 December 15, 

2022

230 days
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12. Because Forepont did not satisfy the requirements of the Audited Financials 

Alternative, Forepont was required to comply with each of the provisions of Rules 206(4)-

2(a)(2), (3), and (4), which it failed to do. For example, Forepont did not ensure that client funds 

and securities were verified by actual examination each year by an independent public accountant 

at a time chosen by the accountant without prior notice or announcement to the adviser, in 

accordance with Rule 206(4)-2(a)(4).

Prohibited Principal Transactions and Undisclosed Conflicts of Interest

13. On March 1, 2021, the Cayman Fund, acting through Forepont, acquired equity 

interests in four companies from two individuals who were officers and co-owners of Forepont and 

a third individual who was also a senior associated person of Forepont: (1) Forepont’s CEO, CIO

and co-owner; (2) its CFO, CCO and co-owner; and (3) a Forepont venture partner. In exchange, 

these three individuals received limited partnership interests in the Cayman Fund. Although these 

in-kind transfers occurred on March 1, 2021, they were deemed to be effective as of September 30, 

2020, the date of the Cayman Fund’s initial close. The individuals purchased the transferred 

securities at various times prior to September 30, 2020.

14. Because the three individuals were officers, owners and/or senior associated 

persons of Forepont, these transfers constituted principal transactions between Forepont, as 

investment adviser, and its advisory client, the Cayman Fund. Accordingly, Section 206(3) of 

the Advisers Act required Forepont to disclose to the Cayman Fund in writing, prior to 

completion of the transfers, that Forepont was acting as principal in these transactions and to 

obtain the Cayman Fund’s consent to each transaction. Forepont and its affiliates could not 

consent to the transactions on behalf of the Cayman Fund because of the conflicts of interest the 

transactions presented, and the Cayman Fund did not have a limited partners’ committee with the 

requisite authority to act on behalf of the limited partners in the event of a conflict. Accordingly, 

Forepont was required to provide the requisite written disclosure to the Cayman Fund’s limited 

partners before completion of the transactions and to obtain their consent to each transaction. 

Forepont failed to do so.

15. Forepont also failed to disclose to the limited partners of the Cayman Fund all the 

material facts concerning additional conflicts of interest arising from the transfers. The transfers

included securities of a company whose CEO and co-founder is the brother of Forepont’s CEO and 

securities of a company whose founder, chairman of the board, and chief innovation officer is the 

Forepont venture partner whose shares were also transferred to the Cayman Fund. Moreover, all 

the securities transferred to the Cayman Fund for purposes of these in-kind exchanges had been 

acquired by the individuals at various times prior to the fund’s close but were transferred to the 

fund at the individuals’ purported cost basis in those securities. Because Forepont did not provide 

advance disclosure to the limited partners of the Cayman Fund of these material facts concerning 

the transfers and the associated conflicts of interest or the relationships between Forepont and the 

individuals whose securities were transferred to the fund, Forepont also violated its fiduciary duty 

to the Cayman Fund and thereby violated Section 206(2) of the Advisers Act in connection with 

these retroactive transfers.
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Compliance Rule Failures

16. In addition, Forepont failed to comply with the requirement that every investment 

adviser registered with the Commission adopt and implement written policies and procedures 

reasonably designed to prevent violations of the Advisers Act and the rules thereunder. See Rule 

206(4)-7(a). While Forepont’s written policies and procedures referenced the custody rule, they

were not reasonably designed and implemented to prevent violations of the rule. Similarly, 

although the compliance manual contained generic language regarding potential conflicts of 

interest, Forepont also lacked written policies or procedures reasonably designed and implemented 

to prevent violations of Sections 206(2) or 206(3) of the Advisers Act with respect to principal or 

other transactions giving rise to the type of conflicts described above.

Violations

17. Section 206(2) of the Advisers Act makes it “unlawful for any investment adviser . 

. . to engage in any transaction, practice, or course of business which operates as a fraud or deceit 

upon any client or prospective client.” Section 206(3) of the Advisers Act prohibits an investment 

adviser from, directly or indirectly, “acting as principal for his own account, knowingly to sell any 

security to or to purchase any security from a client ... without disclosing to such client in writing 

before the completion of such transaction the capacity in which he is acting and obtaining the 

consent of the client to such transaction.”

18. Section 206(4) of the Advisers Act prohibits an investment adviser from engaging

in acts, practices or courses of business that are fraudulent, deceptive, or manipulative, as defined 

by the Commission in rules and regulations promulgated under the statute. Rule 206(4)-2 provides 

that it is a fraudulent, deceptive, or manipulative act, practice or course of business within the 

meaning of Section 206(4) for a registered investment adviser to have custody of client assets 

unless the adviser complies with the custody rule. Among other things, Rule 206(4)-2 requires 

registered investment advisers with custody of client funds or securities to have independent public 

accountants conduct surprise examinations of those client funds or securities, or to have private fund 

clients timely distribute to their investors annual audited financial statements prepared in accordance 

with GAAP. Rule 206(4)-7 requires, among other things, that an investment adviser registered 

with the Commission adopt and implement written policies and procedures reasonably designed to 

prevent violation of the Advisers Act and rules thereunder.

19. As a result of the conduct described above, Forepont willfully1 violated Sections

206(2), 206(3) and 206(4) of the Advisers Act and Rules 206(4)-2 and 206(4)-7 thereunder. 

1

“Willfully,” for purposes of imposing relief under Sections 15(b) of the Exchange Act and 203(e) of the Advisers 

Act, “‘means no more than that the person charged with the duty knows what he is doing.’” Wonsover v. SEC, 205 

F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)). There is no 

requirement that the actor “also be aware that he is violating one of the Rules or Acts.” Tager v. SEC, 344 F.2d 5, 8 

(2d Cir. 1965). The decision in The Robare Group, Ltd. v. SEC, which construed the term “willfully” for purposes of 

a differently structured statutory provision, does not alter that standard. 922 F.3d 468, 478-79 (D.C. Cir. 2019) 

(setting forth the showing required to establish that a person has “willfully omit[ted]” material information from a 

required disclosure in violation of Section 207 of the Advisers Act).
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IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest to 

impose the sanctions agreed to in the Offer.

Accordingly, pursuant to Sections 203(e) and 203(k) of the Advisers Act, it is hereby 

ORDERED that:

A. Respondent shall cease and desist from committing or causing any violations and 

any future violations of Sections 206(2), 206(3), and 206(4) of the Advisers Act and Rules 206(4)-2 

and 206(4)-7 thereunder. 

B. Respondent is censured. 

C. Within 21 days of the entry of the Order, Forepont shall pay a civil monetary 

penalty in the amount of $150,000 to the Commission for transfer to the general fund of the United 

States Treasury, subject to Exchange Act Section 21F(g)(3). If timely payment is not made, 

additional interest shall accrue pursuant to 31 U.S.C. § 3717.

D. Payment must be made in one of the following ways: 

(1) Respondent may transmit payment electronically to the Commission, 

which will provide detailed ACH transfer/Fedwire instructions upon 

request; 

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to: 

Enterprise Services Center

Accounts Receivable Branch

HQ Bldg., Room 181, AMZ-341

6500 South MacArthur Boulevard

Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying 

Forepont as the Respondent in these proceedings and the file number of these proceedings; a 

copy of the cover letter and check or money order must be sent to George Stepaniuk, Assistant

Regional Director, Securities and Exchange Commission, New York Regional Office, 100 Pearl

Street, Suite 20-100, New York, NY 10004.
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E. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 

treated as penalties paid to the government for all purposes, including all tax purposes. To 

preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 

Action, Respondent shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of 

any award of compensatory damages by the amount of any part of Respondent’s payment of a civil 

penalty in this action (“Penalty Offset”). If the court in any Related Investor Action grants such a 

Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting 

the Penalty Offset, notify the Commission’s counsel in this action and pay the amount of the 

Penalty Offset to the Securities and Exchange Commission. Such a payment shall not be deemed 

an additional civil penalty and shall not be deemed to change the amount of the civil penalty 

imposed in this proceeding. For purposes of this paragraph, a “Related Investor Action” means a 

private damages action brought against Respondent by or on behalf of one or more investors based

on substantially the same facts as alleged in the Order instituted by the Commission in this 

proceeding.

By the Commission.

Vanessa A. Countryman

Secretary