Thirteen registered investment advisors have been charged by the Securities and Exchange Commission for repeatedly being delinquent in providing information on their filings over multiple years.
The SEC said in a statement Friday the advisors failed to file annual reports on Form PF informing the agency about the private funds they advise, including the amount of assets under management, fund strategy, performance, and use of borrowed money and derivatives. Form PF collects various data points on private equity firms – such as borrowings – that could be useful reference points for prospective LPs.
The SEC since 2012 has required private fund advisors managing $150 million or more of assets to make annual filings on Form PF. The commission’s findings showed the advisors violated the reporting requirements of the Investment Advisers Act of 1940, and without any admission or denial, each agreed to pay a $75,000 civil penalty.
“These advisors’ repeated reporting failures deprived the SEC of important information they were required by law to provide,” said Anthony Kelly, co-chief of the SEC Enforcement Division’s Asset Management Unit. “We encourage investment advisors to take a fresh look at whether they are meeting their reporting obligations and adjust their compliance programs accordingly.”
The Institutional Limited Partners Association in April expressed its concerns about collection of data in Form PF in a letter to SEC Chairman Jay Clayton, but supported a requirement that Form PF be shared with LPs investing with GPs.
One lawyer said he was troubled by the SEC’s actions. “What is troubling about these ‘sweep’ cases is that, in my experience, the SEC does not differentiate between firms and individuals, on the one hand, who, in good faith, have overlooked the requirements of the rule or may have misunderstood its technical provisions, and, on the other hand, those firms and individuals who intentionally violate or blatantly disregard the filing requirements,” said Ralph Siciliano, a partner at New York law firm Tannenbaum Helpern Syracuse & Hirschtritt.
The 13 advisors in the SEC’s investigations were: Bachrach Asset Management; Biglari Capital; Brahma Management; Bristol Group; CAI Managers & Co; Cherokee Investment Partners; Ecosystem Investment Partners; Elm Partners Management; HEP Management; Prescott General Partners; RLJ Equity Partners; Rose Park Advisors; and Veteri Place.
Nine of the advisors engage mainly in private equity, while four — such as Prescott General Partners — operate hedge funds.
Additional reporting by Nathan Williams