Valuation, Conflicts and Misleading Disclosures Feature Prominently in SEC Settlements with Advisers’ Principals

The SEC recently issued a trio of settlement orders against the principals of a private credit fund’s adviser and the person who sourced investors for that fund. One co‑owner of the investment adviser allegedly failed to comply with the valuation and due diligence procedures outlined in the fund’s offering documents and made misleading disclosures to investors. The other co‑owner allegedly reviewed and approved misleading marketing materials. In addition, a broker-dealer/adviser representative disclosed to investors his compensation arrangements with the fund’s adviser but failed to disclose other sources of compensation from the fund or his and his family’s financial interests in the fund’s portfolio companies. This article analyzes the circumstances that gave rise to the SEC actions and the terms of the settlement orders issued by the SEC against each respondent. See “Key Compliance Issues Facing Credit Managers During the Pandemic” (Sep. 24, 2020).

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