In the Matter of Fifth Street Management, LLC
Admin. Proc. File No. 3-18909
On December 3, 2018, the Commission instituted and simultaneously settled administrative and cease-and-desist proceedings (the “Order”) against Fifth Street Management, LLC (the “Respondent”). In the Order, the Commission found that in 2013 and 2014, the Respondent made improper allocations to its former business development company (“BDC”) clients and failed in the valuation of two portfolio company investment held by one of the BDCs. Further, the Respondent did not implement written policies and procedures reasonably designed to prevent violations of the Advisers Act concerning expense allocation until July 2016, did not implement them for the quality control review of its BDC clients’ quarterly valuation models, and did not have adequate policies and procedures concerning the prevention of the use of material, nonpublic information. The Commission ordered the Respondent to pay disgorgement of $1,999,115.86, prejudgment interest of $334,545.65, and a civil money penalty of $1,650,000.00 to the Commission. The Commission also created a Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the penalty, along with the disgorgement and prejudgment interest, collected can be distributed to those harmed by the Respondent’s conduct described in the Order (the “Fair Fund”). See the Commission’s Order: Release No. 33-10581.
On April 18, 2019, the Commission issued an order appointing Epic Class Action & Claim Solutions, Inc. as the Fund Administrator of the Fair Fund and set the administrator’s bond at $3,983,661.31. See the Commission’s Order: Release No. 34-85684.
On April 29, 2019, the Commission issued an order appointing Miller Kaplan Arase LLP as the Tax Administrator for the Fair Fund. See the Commission’s Order: Release No. 34-85742.
On June 24, 2019, the Commission published a notice of the proposed plan of distribution and opportunity for comment and simultaneously published the proposed plan of distribution (“Proposed Plan”). The notice provided the public with 30 days to submit their comments on the Proposed Plan. See the Commission’s Notice: Release No. 34-86190 and the Proposed Plan.
The Proposed Plan provides that the distribution of the Fair Fund shall be made to those investors in the common stock of the BDC clients during the relevant period for the Respondent’s misallocation of expenses.
On August 1, 2019, the Commission issued an order approving a plan of distribution and simultaneously posted the approved plan of distribution (the “Plan”). See the Commission’s Order: Release No. 34-86551 and the Plan.
For more information, please contact the Commission:
Office of Distributions