• Skip to primary navigation
  • Skip to main content
Logo
Open search bar
  • About
    • Todd Cipperman
    • Why Choose Us
  • Services
    • Money Managers
    • Registered Funds
    • Private Equity
    • Broker-Dealers
    • CyberSecure - Funds
  • In The News
  • Outsourced CCO
  • Client Engagement
  • Resources
    • Helpful Information
    • Regulatory Exams
    • Executive Interviews
    • Blog
    • Podcasts & Videos
    • Best Practices
  • Contact Us

Our Take Blog

Home
Our Take Blog
Private Fund Manager Failed to Obtain Investor Consent for Affiliate Asset Purchase 

Private Fund Manager Failed to Obtain Investor Consent for Affiliate Asset Purchase 

The SEC has commenced enforcement proceedings against a private fund manager for causing the funds to purchase notes from the adviser’s affiliate without investor approval.  Purchasing assets from the adviser’s affiliate constitutes a principal transaction under Advisers Act Section 206(3), which requires investor notice and consent.  The adviser did not obtain such consent, but, instead, relied on the approval of an investment committee comprised of insiders and notice in the financial statements.  The SEC also accused the adviser of illegally diverting funds.

OUR TAKE: Private fund managers that became registered investment advisers because of Dodd-Frank can no longer make internal re-allocations without client consent, regardless of permissive language in the PPM or LPA.  The Advisers Act makes the fund manager a fiduciary subject to all of the Advisers Act’s conflicts prohibitions.

http://www.sec.gov/litigation/admin/2014/ia-3991.pdf

Back to Top
logo
480 E. Swedesford Road, Suite 220, Wayne, PA 19087
610-687-5320
LinkedIn Twitter
© 2020 Marlivia Properties LLC