Advisers that seek to effect trades between the funds they manage swim in rough waters, especially when hard-to-value securities are involved. They get even more turbulent when one of the funds is a registered investment company. The recent SEC enforcement proceeding involving an investment adviser and its founder illustrates the risks faced by advisers that need to sell thinly traded securities to rebalance a portfolio but do not wish to give up the investment. The respondents allegedly effected trades among the hedge and mutual funds they managed by selling a bond to a broker from one fund with the understanding that another fund would soon repurchase the bond, all of which was done at a price set by the founder, rather than the market, the SEC asserted. This article details the trading that gave rise to the proceeding and the terms of the settlement order. See “SEC Imposes Substantial Sanctions for Cross Trades & Principal Transactions, Despite Self-Reporting, Cooperation & Remediation” (Apr. 13, 2023).