A California-based investment adviser to private funds agreed to pay more than $1.6 million to settle charges by the Securities and Exchange Commission (SEC) regarding multiple breaches of its fiduciary duty to clients.
American Infrastructure Funds (AIF) was fined $1.2 million and agreed to pay $445,460 in disgorgement and prejudgment interest, the SEC announced in a press release Friday. The firm agreed to cease and desist from further violations of the Advisers Act and to be censured.
The details: AIF breached fiduciary duty through three separate manners, the SEC alleged in its order.
First, the firm allegedly accelerated a portfolio company monitoring fee without timely disclosure to clients or investors.
Second, the firm failed to adequately disclose conflicts of interest, obtain investor consent, or allow investors to liquidate or exit their investment before transferring an asset owned by AIF-advised funds to a new fund the firm also advised, per the order. The transfer locked up client and investor money into the investment for an additional 11 years, the SEC said.
Third, the firm violated its duty of care by allowing a client’s fund to incur expenses that should have been paid by an affiliated adviser, the SEC said.
Compliance considerations: Since at least 2017, AIF failed to implement its written compliance policies and procedures to prevent violations of the Advisers Act, the SEC alleged.
The agency acknowledged AIF’s remedial efforts, including retention of a compliance consultant to review and improve its policies and procedures.
AIF did not respond to a request for comment. The firm agreed to the settlement without admitting or denying the SEC’s findings.