Adviser Fined for Failing to Timely Repay Loan

An investment adviser settled SEC charges for failing to timely pay back certain expenses through management fee offsets as well as related failures to disclose its practices to investors.

In the Order, the SEC found that the adviser borrowed money from a fund it managed in order to pay placement agent fees. Under the terms of the fund's governing documents, prompt repayment was required. Instead, the SEC concluded that the adviser failed to repay the funds in a timely manner and did not disclose this failure to investors.

As a result, the SEC determined that the adviser violated Advisers Act Section 206(2) and Section 206(4) ("Prohibited transactions by investment advisers") and IAA Rule 206(4)-8 ("Pooled investment vehicles"). To settle the charges, the adviser agreed to (i) cease and desist, (ii) accept a censure and (iii) pay a civil monetary penalty of $325,000.

Premium Content

Available only to Premium subscribers.