On November 19, 2013, the SEC issued an Order Instituting Administrative and Cease-and-Desist Proceedings (Order) against hedge fund manager and investment adviser Agamas Capital Management, LP (Agamas).  The SEC claimed that, during 2007 and 2008, Agamas failed to follow its own valuation policies in valuing mortgage-backed securities and other thinly-traded securities and failed to document properly its deviation from those policies.  See “DLA Piper Hedge Fund Valuation Webinar Covers Fair Value Methodologies, Valuation Services, Valuing Illiquid Positions and Handling Valuation Inquiries During SEC Examinations,” Hedge Fund Law Report, Vol. 6, No. 31 (Aug. 7, 2013); and “SEC Commissioner Aguilar Discusses Insider Trading by Hedge Fund Managers, Valuation and Other Examination and Enforcement Pressure Points,” Hedge Fund Law Report, Vol. 6, No. 18 (May 2, 2013).  The agency also charged that Agamas entered into cross trades with a separately managed account that it advised without having appropriate policies and procedures in place to manage the potential conflicts of interest that arose in connection with the cross trades.  Importantly, this action suggests the SEC’s heightened focus on circumstances where managers are authorized to exercise significant discretion in valuing securities.  This article summarizes the factual and legal allegations contained in the Order, as well as the remedies agreed to by Agamas.  The article also identifies important implications for hedge fund managers arising out of the settlement.  See also “SEC Charges Hedge Fund Manager with Impermissible Cross Trades, Inflating Valuation and Misleading Investors in a Scheme to Hide Fund Losses,” Hedge Fund Law Report, Vol. 5, No. 45 (Nov. 29, 2012).