Registered investment adviser Global Infrastructure Management has agreed to pay a $4.5 million civil penalty as part of a settlement reached with the Securities and Exchange Commission (SEC) for fee offset and disclosure failures caused by deficiencies in its compliance program.
In addition to the agreement, announced Monday, Global has voluntarily repaid $5.4 million to private fund clients affected by its alleged actions. The company neither admitted nor denied the SEC’s findings of violations of Sections 206(2) and 206(4) of the Investment Advisers Act in reaching a settlement.
Global, registered in Delaware but principally doing business in New York, provides investment advisory services to pooled investment vehicles, single investor private funds, and separately managed accounts.
The details: The SEC’s complaint focuses on three specific Global Infrastructure Partners funds in which the alleged deficiencies occurred. The agency noted two of the funds had governing documents regarding fee offset procedures that were not followed, resulting in the company failing to apply the required offsets and charging clients millions in additional management fees.
Two funds were also affected by Global’s alleged failures to adopt or implement reasonable policies and procedures to identify and address inconsistencies in fund documents and communications with investors. A lack of clarity around how management fees were calculated led to one 2011 example cited by the SEC where a limited partner investor was misled whether a partial disposition would reduce management fees.
Global repaid that investor north of $550,000, plus interest, as part of its voluntary remediations.
“Private equity fund advisers 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 Aderton, co-chief of the SEC Enforcement Division’s Asset Management Unit, in a press release. “Robust compliance programs are critical to help ensure that clients are not misled and receive full and accurate disclosure.”
The deficiencies cited by the SEC in its complaint affected funds between 2009 and 2019. As part of its remediation efforts, Global has enhanced fund disclosures and improved procedures and controls around the calculation of fee offsets, according to the agency.
No further details were provided by the SEC regarding specific compliance deficiencies or improvements made.
Global did not respond to a request for comment.