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SEC Charges Monroe Capital for Failing to Disclose SPAC-Related Conflicts of Interest

July 20, 2023

File No. 3-21533

July 20, 2023

The Securities and Exchange Commission today announced settled charges against Chicago-based investment adviser Monroe Capital Management Advisors, LLC for failing to disclose conflicts of interest regarding its personnel’s ownership of sponsors of special purpose acquisition companies (SPACs) into which Monroe Capital advised its clients to invest.

According to the SEC’s order, Monroe Capital personnel became involved in multiple SPACs whose sponsors were partially owned by Monroe Capital personnel and affiliates.  The Monroe Capital personnel were entitled to a portion of the compensation the SPAC sponsors received upon completion of the SPACs’ business combinations.  The order finds that Monroe Capital invested assets of private funds it advised in certain transactions that helped finance the SPACs’ business combinations and did not timely disclose these conflicts.  In addition, the order finds that Monroe Capital failed to timely file amended reports on Schedule 13G concerning changes to its and its affiliates’ beneficial ownership of the common stock of a public company formed as a result of a SPAC business combination.

Monroe Capital consented to the entry of the SEC’s order finding that the firm violated the antifraud and compliance provisions of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder, and violated and/or caused violations of the beneficial ownership reporting provisions of Section 13(d) of the Securities Exchange Act of 1934 and Rule 13d-2 thereunder.  Without admitting or denying the findings, Monroe Capital agreed to a cease-and-desist order, a censure, and a $1 million civil penalty to settle the charges.

The SEC’s investigation was conducted by Anne Hancock and Oreste McClung, members of the Enforcement Division’s Asset Management Unit in the Boston and Philadelphia Regional Offices, and supervised by Brendan McGlynn, Amy Friedman, and Corey Schuster.

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