• SEC Settles Charges Against Private Equity Fund Adviser For Breaches Of Fiduciary Duty
  • December 4, 2015
  • Law Firm: Sutherland Asbill Brennan LLP - Washington Office
  • Last week, the SEC announced the settlement of charges that it brought against a private equity fund adviser regarding alleged breaches of its fiduciary duty to the funds it advised. In its action against JH Partners, LLC (“adviser”), the SEC alleged that the adviser failed to disclose to the funds’ advisory boards that it (i) had made loans to the funds’ portfolio companies totaling $62 million, and , in the process, obtained interests in the portfolio companies that were senior to the interests owned by the funds, and (ii) caused one of its funds to invest at a better priority level and/or valuation with respect to interests in a portfolio company held by both of its funds, thereby favoring one fund client over another. The SEC also alleged that the funds’ organizational documents required the adviser to disclose to the funds’ advisory boards overconcentration in certain portfolio companies, and obtain consents from the boards or the limited partners in certain circumstances, but that the adviser failed to comply with these requirements in connection with certain portfolio company investments. As a result of these allegations, the adviser was fined $225,000.

    The release announcing the settlement of the charges against the adviser can be found here: https://www.sec.gov/litigation/admin/2015/ia-4276.pdf