UNITED STATES OF AMERICA

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934

Release No. 96310 / November 14, 2022

ADMINISTRATIVE PROCEEDING

File No. 3-20030

:

In the Matter of

:

:

Northern Trust Hedge Fund Services :

LLC and Northern Trust Global Fund :

Services Cayman Limited,

:

:

Respondents.

:

ORDER APPROVING PLAN OF

DISTRIBUTION AND DIRECTING

TRANSFER OF FAIR FUND

On September 18, 2020, the Commission issued an Order Instituting Cease-and-Desist

Proceedings Pursuant to Section 203(k) of the Investment Advisers Act of 1940, Making

Findings, and Imposing a Cease-and-Desist Order (the “Order”)1 against Northern Trust Hedge

Fund Services LLC and Northern Trust Global Fund Services Cayman Limited (collectively, the

“Respondents”), the fund administrators for the LR Global Frontier Master Fund, Ltd. and two

feeder funds, the LR Global Frontier Fund, Ltd. (offshore) and the LR Global Frontier Fund LP

(onshore) (collectively, the “Funds”). According to the Order, from at least 2013 through mid2017, Donald S. LaGuardia (“LaGuardia”), through the investment adviser he controlled, L-R

Managers, LLC (“L-R Managers”) (collectively with LaGuardia, the “Advisers”), defrauded the

Funds and their investors, misappropriating money from the Funds and directing that some of the

misappropriated amounts be recorded as a promissory note and receivable “due from” L-R

Managers to the Funds to conceal the misappropriation. The Order further finds that the

Respondents caused the Advisers’ violations of the antifraud provisions of the Investment

Advisers Act of 1940 by, among other things, failing to adequately escalate concerns they

identified regarding the Advisers prior to their engagement, permitting the Advisers to make

unsupported withdrawals, improperly accounting for account receivables, and failing to obtain

sufficient pricing support for a significant holding of the Funds. The Commission ordered

Northern Trust Hedge Fund Services LLC to pay disgorgement of $15,076 and prejudgment

interest of $2,553, and ordered the Respondents, jointly and severally, to pay a civil money

payment of $150,000. The Commission further established a Fair Fund (the “Northern Trust Fair

Fund”) pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the collected civil

penalty, along with collected disgorgement and prejudgment interest, can be distributed to

harmed investors. The Respondents have paid in full.

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Advisers Act Rel. No. 5585 (Sept. 18, 2020).

The Northern Trust Fair Fund is comprised of the $167,629 paid by the Respondents and

is held in an interest-bearing account at the U.S. Department of Treasury’s Bureau of the Fiscal

Services. Accrued interest will be added to, and become a part of, the Northern Trust Fair Fund.

The Related Civil Action

On June 24, 2019, the Commission filed a civil action in the United States District Court

for the Southern District of New York charging LaGuardia for the underlying fraud.2 The

Commission charged LaGuardia with misappropriating approximately $2.6 million from

investors and concealing the misappropriation through fraudulent accounting devices. On July 5,

2022, upon motion of the Commission, the district court entered an order (the “Distribution

Order”) that directs The Northern Trust Company (“Northern Trust”), the custodian of the

Funds, to liquidate the assets in its custody account and transfer the custody account assets to the

Court Registry Investment System account for the Civil Action (the “CRIS Account”).3 In the

Distribution Order, the district court further appoints Lain, Faulkner and Co., P.C., a CPA firm

headquartered in Dallas, Texas (“Lain Faulkner”), as distribution agent in the Civil Action, to

work with the Commission staff to distribute all funds in the CRIS Account (the “Distribution

Fund”), including any funds received from the Northern Trust Fair Fund, pursuant to a plan to be

approved by the district court. The Distribution Order further directs Lain Faulkner to act as the

tax administrator for the Distribution Fund. Pursuant to the Distribution Order, costs of the

distribution and tax administration of the assets in the Distribution Fund will be paid by the

Respondents and their affiliates.4 Northern Trust has transferred some of the custodial funds and

the Distribution Fund currently holds $10,000.

The Transfer of the Northern Trust Fair Fund to the CRIS Account

The Division of Enforcement (the “Division”) has concluded that distributing the

Northern Trust Fair Fund through the Civil Action is fair and reasonable because it reduces

administrative costs and employs a more efficient use of resources to benefit investors harmed as

a result of the Respondents’ misconduct than would two separate distribution processes.

On October 6, 2022, the Commission published a Notice of Proposed Plan of Distribution

and Opportunity for Comment (“Notice”)5 pursuant to Rule 1103 of the Commission’s Rules on

Fair Fund and Disgorgement Plans (“Commission’s Rules”).6 The Notice advised interested

persons that they could obtain a copy of the proposed plan of distribution (“Proposed Plan”)

from the Commission’s public website at http://www.sec.gov/litigation/fairfundlist.htm or by

submitting a written request to Catherine E. Pappas, Esq., United States Securities and Exchange

Commission, One Penn Center, 1617 JFK Blvd., Ste. 520, Philadelphia, PA 19103.

SEC v. Donald S. LaGuardia, Jr., No. 19-cv-05895 (S.D.N.Y.) (the “Civil Action”).

Civil Action, ECF No. 78.

4

Tax obligations of the Distribution Fund will be paid by the Distribution Fund.

5

Exchange Act Rel. No. 96000 (Oct. 6, 2022).

6

17 C.F.R. § 201.1103.

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The Notice also advised that all persons desiring to comment on the Proposed Plan could

submit their comments, in writing, no later than thirty (30) days from the date of the Notice (1) to

the Office of the Secretary, United States Securities and Exchange Commission, 100 F Street, NE,

Washington, DC 20549-1090; (2) by using the Commission’s Internet comment form

(http://www.sec.gov/litigation/admin.shtml); or (3) by sending an email to rulecomments@sec.gov. The Commission received no comments on the Proposed Plan during the

comment period.

The Proposed Plan provides for the transfer of the Northern Trust Fund, less any

investment fees incurred while held at the Commission, to the Distribution Fund established in the

Civil Action for distribution to harmed investors in accordance with a plan to be approved by the

district court.

The Division, therefore, now requests that the Commission approve the Proposed Plan as

published and authorize the transfer of the Northern Trust Fair Fund to the Distribution Fund

established in the Civil Action.

Accordingly, it is hereby ORDERED that:

A.

Pursuant to Rule 1104 of the Commission’s Rules, 17 C.F.R. § 201.1104, the

Proposed Plan is approved, and the approved Plan of Distribution shall be posted

simultaneously with this order on the Commission’s website at www.sec.gov; and

B.

In accordance with Rule 1102(a) of the Commission’s Rules, 17 C.F.R.

§ 201.1102(a), the Commission staff shall transfer the Northern Trust Fair Fund,

less investment fees incurred while held at the Commission, to the Distribution

Fund established in the Civil Action for distribution to harmed investors in

accordance with a distribution plan to be approved by the district court.

By the Commission.

Vanessa A. Countryman

Secretary

3