In recent years, both hedge fund and private equity investors have markedly increased their demand for co‑investment opportunities. For all the economic upside co‑investments can offer investors, it introduces concomitant intricacies to fund manager compliance practices. See “How to Seize Upon Rising Opportunity While Minimizing Compliance and Market Risk” (Jun. 8, 2017). SEC scrutiny of co‑investment practices can result in fines and reputational harm for fund managers that fail to thoughtfully craft and execute appropriate policies and procedures. In an example of this risk, the SEC recently settled enforcement proceedings against an investment adviser for misallocating to its fund investors expenses that should have been shared with co‑investors, as well as for having undisclosed fee-sharing agreements. The SEC also found a conflict of interest arising from the manager’s failure to allocate fees and expenses to an affiliate fund composed of its employees. Despite fully reimbursing the injured parties before it was contacted by SEC enforcement staff, the manager was still ordered to pay significant civil penalties. This article analyzes the SEC settlement order. For more on co‑investments, see “Sadis & Goldberg Seminar Highlights the Ample Fundraising and Co‑Investment Opportunities in the Private Equity Industry, Along With Attendant Deal Flow and Fee Structure Issues” (Dec. 8, 2016); and “Private Equity Firms From Across the Industry Spectrum Advise on Trends and Terms in the Current Co‑Investment Market” (Aug. 11, 2016).