SEC Sanctions 13 Private Fund Advisers For Filing Failures
Since at least the issuance of the report by the Commission’s Enforcement Division last November, the emphasis has been on retail investors and cyber. The “number of cases filed” focus of broken windows, which for years generated increasing numbers of enforcement actions, became a vestige of days gone by. Yet some times things remain the same even as they appear to change.
Under broken windows groups of cases that were easily identified by a computer program or similar method were periodically packaged together and brought at one time, generating a headline. That approach seems to be enjoying something of a revival, retooled perhaps toward retail investors. The Commission filed 13 settled actions naming investment advisers as Respondents to close out last week. Each alleges violations of certain reporting provisions under the Investment Advisers Act regarding private funds as mandated by Dodd-Frank. See, e.g. In the Matter of Bachrach Asset Management Inc., Adm. Proc. File No. 3-18511 ((June 1, 2018); In the Matter of Cherokee Investment Partners, Inc., Adm. Proc. File No. 3-18516 (June 1, 2018).
Each case in the group alleged violations of Rule 204(b)-1 of the Advisers Act. Under that rule a report on Form PF must be filed if the adviser is registered, or required to be registered, and advisees a private fund with at least $150 million in assets. Most filers provide basic information regarding the advised funds’ performance and leverage. The filing has to be updated annually.
The Commission uses the information to report annually to Congress. Specifically, the Form is primarily designated for use in providing the Financial Stability Oversight Council with information important to understanding and monitoring systemic risk in the private fund industry. The agency also uses the information in examinations, investigations and its investor protection efforts. Certain aggregated information derived from the filings is published.
Respondents Bachrach and Cherokee are registered investment advisers that advise private funds. Each failed to make the required filing. Each adviser resolved the proceedings, consenting to the entry of a cease and desist order based on Rule 204(b)-1. Each also agreed to a censure and will pay a penalty of $75,000. In each proceeding the Commission considered the remedial efforts of the adviser.
The settlements in Bachrach and Cherokee are typical of those among the group of thirteen advisers charged. The other eleven advisers who were charged and settled are: Biglan Capital LLC, Brahma Management Ltd., Bristol Group Inc., CAI Managers & Co. L.P., Ecosystem Investment Partners LLC, Elm Partners Management LLC, HEP Management Corp., Prescott General Partners LLC, RLJ Equity Partners LLC, Rose Park Advisors LLC and Veteri Place Corp.