Personal Loan Results in Industry Bar for PE Fund Manager

The SEC fined and barred from the industry the principal of a private equity real estate manager for taking unauthorized personal loans from the funds his firm managed.  FINRA uncovered the loans during an exam when FINRA staff found discrepancies between bank statements and the firm’s general ledger.  Although the respondent repaid the loans, the SEC asserts potential harm to investors because the borrowed funds were not available to make investments as described in the offering documents.

OUR TAKE: The SEC will come down hard on conflict-of-interest transactions where fund managers use invested assets as a personal piggy bank.  And, the chance of getting caught is much higher in this environment where examiners will check financial records and other transaction data.  In this case, the respondent lost his entire business because of an $85,000 loan.