Recent SEC Settlement Underscores Continued Enforcement Focus On Management Fee Practices

The SEC recently announced a settlement with a middle market private equity fund adviser alleging that the firm breached its fiduciary duties in connection with management fee offset calculation practices.¹ The SEC found that these practices created an undisclosed conflict of interest and were inconsistent with the relevant Limited Partnership Agreements (LPAs) between the adviser and the funds.

The findings in the SEC's settled order (Order) reflect the SEC's continued focus on management fee practices, particularly at a time when the SEC is making private funds more accessible to retail clients.

Background

The SEC's order found that the adviser engaged in two inappropriate fee offset calculation practices.