Summit-based investment adviser Energy Capital Partners Management LP (ECP) was charged June 14 by the Securities and Exchange Commission with allocating undisclosed, disproportionate expenses to a private equity fund it advises.
As part of a settlement with the SEC, ECP has agreed to pay a $1 million penalty and has voluntarily paid back more than $3.3 million to the fund.
According to the charges, ECP led an investment consortium to acquire the stock of a public company in a take-private transaction that closed in March 2018. In connection with that transaction, ECP agreed that third-party co-investors would not have to bear expenses related to a credit facility used to finance the transaction. As a result, it was deemed that ECP allocated a disproportionate share of expenses to a private equity fund without disclosure.
The SEC found that these expenses should have either been disclosed or not allocated in this way.
“Private equity fund advisers must follow their own agreements and ensure that investors do not pay more in fees or expenses than they bargained for,” said Adam Aderton, co-chief of the SEC Enforcement Division’s Asset Management Unit. “This resolution ensures that investors are repaid, while reaffirming the SEC’s commitment to focus on misconduct in the private fund space, including that involving co-investor issues.”
Without admitting or denying the SEC’s findings, ECP agreed to a cease-and-desist order and censure, in addition to the $1 million penalty.
