In a recent enforcement action, the Securities and Exchange
Commission (the "SEC") again demonstrated its continuing
focus on private equity conflicts of interest and disclosure.
In the order dated November 23, 2015, the SEC alleged that JH
Partners, LLC ("JHP"), a California-based manager of
three private equity funds, failed to adequately disclose potential
conflicts arising from insider loans and a cross-fund investment,
and also permitted violations of fund concentration
limits.1
The order indicates that from 2006 to 2012, JHP and certain of
its principals loaned approximately $62 million to portfolio
companies "to provide interim financing for working capital or
other urgent cash needs." While the loans may have been
well-intentioned, the order states that JHP and its principals in
certain cases obtained interests in the portfolio companies that
were senior to the equity interests held by the JHP funds.
The SEC indicates that in most cases, JHP failed to
