According to FINRA, Blakely Chapman Page was assessed a deferred fine of $5,000 and suspended for six months for making negligent misrepresentations about an investment fund's performance to prospective investors.

Page formed a hedge fund (the feeder fund) designed to pool investor funds and invest in another, unaffiliated hedge fund (the master fund). The marketing materials for the feeder fund included performance numbers for the master fund that were provided by the master fund itself. However, these performance numbers significantly overstated the master fund's historic rate of return, a material fact.

Page did not independently verify the accuracy of the performance results provided by the master fund but asked others to conduct due diligence. He distributed the marketing materials containing the materially inaccurate performance numbers to more than two dozen prospective investors. Page also exchanged emails with multiple prospective investors affirming the accuracy of the master fund's performance results as set forth in the feeder fund's marketing materials.

Critically, Page continued affirming the accuracy of these performance results even after others at the feeder fund received information that called those performance results into question. Page did not review that information because he relied on others to do so. This delegation of responsibility for verifying material information is inadequate when directly communicating with prospective investors about performance.

Seven different investments were made in the feeder fund totaling approximately $1.7 million. When the master fund stopped providing continuing performance information and other customary investment materials, the feeder fund redeemed its investors' investments and the investors received full redemptions. While investors ultimately received their money back, they made investment decisions based on materially false performance information.

FINRA found Page's misrepresentations to be negligent rather than intentional, meaning he should have known the performance numbers were inaccurate but did not deliberately mislead investors. Nevertheless, negligent misrepresentations violate securities laws because representatives have a duty to ensure that information they provide to investors is accurate.

For investors, this case illustrates the critical importance of independently verifying performance claims, especially for hedge funds and alternative investments. Past performance is one of the most important factors investors consider, so accurate performance information is essential. Investors should ask how performance figures were calculated, whether they have been independently verified or audited, and whether the representative personally verified the information rather than simply relying on the fund manager. The suspension is in effect from June 6, 2022, through December 5, 2022.