A Maryland-based private equity fund advisory firm and its owner agreed to pay over $3.1 million in settlement of SEC charges that they committed various securities law violations, including engaging in brokerage activity and charging fees without registering as a broker-dealer. The firm and its owner performed brokerage services in-house for two private equity funds that they advise, instead of using third-party investment banks or registered broker-dealers to handle the purchase and sale of portfolio companies.
According to the SEC’s order, the firm and its owner also engaged in conflicted transactions, made political and charitable contributions using fund assets in contravention of fund documents, and failed to adequately disclose various fees and expenses charged.
The firm did not admit or deny the findings, but agreed to be censured. The firm and its owner were also required to cease and desist from further violations, while paying disgorgement amounts together with interest and a $500,000 penalty.