SEC Settles with Investment Adviser Who Failed to Disclose Conflicts of Interest and Misallocated Expenses
Dec. 13, 2018
File No. 3-18930
December 13, 2018 - The Securities and Exchange Commission today announced that registered investment adviser Yucaipa Master Manager, LLC, based in Los Angeles, California, agreed to settle claims that Yucaipa failed to disclose several financial conflicts of interests and misallocated fees and expenses.
According to the SEC's order, Yucaipa did not disclose to the funds its practice of charging the funds for the cost of certain in-house employees who assisted in preparing the funds' tax returns. Yucaipa also did not disclose its arrangements with two third-party service providers that resulted in expense allocation decisions that posed actual or potential conflicts of interest. The order also found that Yucaipa misallocated fees and expenses between Yucaipa, the funds, the funds' portfolio investments, and Yucaipa's principal's personal investments.
The SEC's order found that Yucaipa negligently violated the antifraud provisions and the compliance rule of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940, and Rules 206(4)-7 and 206(4)-8 thereunder. Without admitting or denying the SEC's findings, Yucaipa consented to a cease-and-desist order, the payment of $1,934,312 in disgorgement and prejudgment interest and a $1,000,000 civil penalty, and an undertaking for an independent compliance consultant.