On June 15, 2011, the SEC charged Pegasus Investment Management, LLC, a registered investment adviser and the general partner of two private funds, and two of its officers in connection with undisclosed cash payments. According to the SEC, between 2008 and 2009, Pegasus aggregated its futures trades with a proprietary trading firm’s trades placed through a common broker in order for the proprietary trading firm to obtain reduced commission rates from the broker and, in exchange, the proprietary trading firm made monthly cash payments to Pegasus. The proprietary trading firm paid an estimated $90,000 in cash to Pegasus under this arrangement. Pegasus treated the $90,000 as its own asset and did not disclose the arrangement to the funds’ investors in offering documents, partnership agreements or Pegasus’ Form ADV. The SEC found that Pegasus’ arrangement with the proprietary trading firm constituted fraud, and Pegasus was ordered to pay disgorgement of $90,000 and prejudgment interest of $5,469. Two of Pegasus’ officers were censured and ordered to pay civil money penalties in the amounts of $50,000 and $25,000, respectively.