SEC Files Settled Charges Against Private Equity Fund Adviser with Conflicted Expense Reimbursements
April 22, 2020
File No. 3-19764
April 22, 2020 - The Securities and Exchange Commission today announced settled charges against New York-based private equity fund adviser Monomoy Capital Management, L.P., for failing to fully disclose or obtain consent to its practice of charging private fund portfolio companies for the costs of certain services.
According to the SEC's order, Monomoy provided fund portfolio companies with operationally-focused services through a group of Monomoy employees known as the Operations Group. Monomoy charged portfolio companies for the services of the Operations Group, which allowed Monomoy to recoup most of its costs of maintaining the group. The SEC's order finds that Monomoy did not, however, provide full and fair disclosure that it would charge the portfolio companies for the services, or otherwise obtain consent to the associated conflicts of interest.
Without admitting or denying the SEC's findings, Monomoy has consented to the entry of the Order finding that it violated the antifraud provision of Section 206(2) of the Investment Advisers Act of 1940. Monomoy also agreed to cease and desist from further violations and to be censured. Monomoy agreed to pay disgorgement of $1,521,972 and prejudgment interest of $204,606, and a civil penalty of $200,000. The disgorgement, prejudgment interest and penalty, totaling $1,926,579, will be contributed to a Fair Fund, and Monomoy will distribute the funds to the affected investors.
The SEC's investigation was conducted by Karen E. Willenken and Brian Fitzpatrick of the Asset Management Unit. An SEC examination, which contributed to the investigation, was conducted by William Delmage, Linda Heaphy, Kathleen Furey and Syed Husain of the New York Regional Office and Norman Von Holtzendorff of the Los Angeles Regional Office.