The Securities and Exchange Commission today charged $77 billion Global Infrastructure Management, an RIA based in New York, with fraud and fee and expense disclosure failures related to two of its private equity funds.
The firm, which has already “voluntarily” repaid $5.4 million in restitution to clients, settled the charges with the agency without admitting or denying the charges, according to the SEC.
Clients “overpaid millions in management fees” because “Global failed to offset certain portfolio company fees, as it was required to do under the funds’ offering and governing documents,” the agency said in its charging document.
"Private equity fund advisors “must ensure that investors do not pay more in fees or expenses than they bargained for and are given accurate information about fees and expenses," said Adam S. Aderton, co-chief of the SEC Enforcement Division’s Asset Management Unit.
Global also gave investors inconsistent statements about how the firm would calculate management fees--violations “caused by Global’s compliance program deficiencies,” the SEC said.
"Robust compliance programs are critical to help ensure that clients are not misled and receive full and accurate disclosure,” Aderton added.
Specifically, disclosures for Global Infrastructure Partners Fund I and Fund III both told investors that any advisory, directors, transaction, topping, break-up or other fees received by Global or its affiliates would be credited 80% against management fees.
Between December 2009 and March 2019, a portfolio company investment held by Fund I and other co-investors paid Global approximately $12.4 million in advisory fees for services provided to the portfolio company. At the time, Global did not apply the 80% offset against management fees, which totaled some $4.1 million plus interest the SEC said.
The firm “voluntarily remediated Fund I limited partners its pro-rata portion of the advisory fee in the amount of $4,164,153, plus interest,” the agency said.
Director fees paid by portfolio company investments to Global and its affiliates in the immediately preceding management fee period were also supposed to be credited 100% against management fees, the SEC said. In the period November 2016 through March 2019, a portfolio company investment held by Fund III paid Global $1.26 million in director fees.