SEC Charges Venture Capital Funds Adviser in Connection with Unauthorized and Undisclosed Inter-Fund Loans
Sept. 12, 2022
File No. 3-21063
September 12, 2022 - The Securities and Exchange Commission today announced settled charges against California-based investment advisers SparkLabs Management, LLC and SparkLabs Global Ventures Management, LLC, and Bernard Moon (a principal of both entities), for making inter-fund loans without having authorization to do so, disclosing the associated conflicts of interest, or determining whether the loans were in their clients' best interests.
According to the order, from at least April 2016 through November 2019, SparkLabs Management, SparkLabs Global Ventures Management, and Moon directed certain venture capital funds they managed to make more than 50 loans totaling over $4.4 million to their affiliates and other funds under Respondents' management. The order further finds that the governing documents for the funds did not authorize the loans to affiliates, and Respondents did not describe the potential or actual conflicts of interest associated with such loans. In addition, according to the order, Respondents did not undertake a process to determine whether the loans or the terms of those loans were in the best interests of the lending funds.
The SEC's order finds that SparkLabs Management, SparkLabs Global Ventures Management, and Moon violated the antifraud provisions of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. SparkLabs Management and SparkLabs Global Ventures Management have agreed, without admitting or denying the SEC's findings, to a cease-and-desist order, a censure, and to pay, on a joint and several basis, a civil penalty of $200,000. Moon has agreed, without admitting or denying the SEC's findings, to a cease-and-desist order, a censure, and a civil penalty of $25,000.
The SEC's investigation was conducted by Ariana Torchin and supervised by Jeremy Pendrey, both of the Enforcement Division's Asset Management Unit in the San Francisco Regional Office. Alexander Lefferts of the Enforcement Division's Office of Investigative & Market Analytics and Crystal Boodoo of the SEC's San Francisco Regional Office assisted with the investigation.