SEC Strikes a Harsh Tone on Receipt of Transaction-based Compensation by Private Equity Fund Managers

Posted on June 15th, by , and in Investment Advisers, Private Equity. Comments Off on SEC Strikes a Harsh Tone on Receipt of Transaction-based Compensation by Private Equity Fund Managers

On June 1, 2016, the Securities and Exchange Commission (SEC) sent a warning to private equity fund managers who receive transaction-based fees in connection with the purchase and sale of portfolio companies by charging Blackstreet Capital Management (Blackstreet), a private equity fund advisory firm, and its principal, Murry Gunty with, among other things, acting as an unregistered broker-dealer. According to the SEC, Blackstreet received fees, separate and apart from its management fees, for performing “in-house brokerage services” in connection with the acquisition and disposition of portfolio companies for two private equity funds. The fact that Blackstreet Capital fully disclosed the fees did not affect the SEC’s conclusion that Blackstreet acted as an unregistered broker-dealer.

Blackstreet and Gunty settled, on a neither-admit-nor-deny basis, with the SEC and agreed to pay more than $3.1 million in disgorgement and civil penalties. Importantly, the $3.1 million … Read More »




From the Blog:

CFTC Divisions Publish Inaugural Exam Priorities

In an effort to increase awareness and attention by regulated entities, the CFTC’s divisions of Market Oversight (DMO), Swap Dealer & Intermediary Oversight (DSIO), and Clearing...

Good Disclosure of Bad Internal Controls Is Not Enough

On January 29, the SEC announced settled charges with four public companies for failing to maintain adequate internal control over financial reporting (ICFR). According...

Alert: FINRA’s 529 Plan Share Class Initiative to Self-Report

On January 28, 2019, FINRA released its Regulatory Notice 19-04 announcing its 529 plan self-reporting initiative. This initiative is part of FINRA efforts to...