SEC Charges Investment Adviser with Failing to Disclose Financial Conflict of Interest
Aug. 13, 2019
File No. 3-19334
August 13, 2019 - The Securities and Exchange Commission today announced settled charges against MVP Manager LLC ("MVP"), a New York-based investment adviser to private funds, for failing to adequately disclose conflicts of interest.
According to the SEC's order, MVP advised and managed private fund clients that invested in the securities of venture-backed companies that had not conducted initial public offerings. The order finds that on three occasions between December 2014 and December 2015, MVP personnel arranged to receive a brokerage commission from the counterparty that was selling such securities to MVP's client funds. Each of these arrangements created a potential or actual conflict of interest because MVP and its personnel had an economic incentive to cause the private funds to purchase the securities at the prices MVP negotiated with the counterparties, which would trigger the payment of the commissions. None of the disclosure documents that MVP provided to fund investors, however, revealed the existence of the arrangements or MVP's attendant conflicts of interest.
The SEC order finds that MVP willfully violated the antifraud provisions of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. Without admitting or denying the SEC's findings, MVP agreed to settle by consenting to a cease-and-desist order and censure, disgorgement and prejudgment interest of approximately $170,000, and a civil monetary penalty of $80,000.
The SEC's investigation was conducted by Wendy B. Tepperman, Eric C. Kirsch, and Jonathan M. Grant under the supervision of Sanjay Wadhwa of the New York Regional Office. The investigation followed an examination conducted by Kenneth Leung and Marie Hagelstein of the Boston Regional Office and Katherine Feld of the National Exam Program.