Fenway Partners to Pay $10 Million Over Conflicts of Interestby
Fenway failed to adequately disclose bonus payments, SEC says
Private-equity fund rerouted company fees to affiliate
Fenway Partners LLC agreed to pay more than $10 million to settle allegations by the U.S. Securities and Exchange Commission that the private equity firm failed to properly disclose conflicts of interest, including bonuses totaling $15 million paid to employees.
The New York-based private equity firm rerouted certain company fees to an affiliate entity and did not offset those costs with lower management expenses, according to a statement Tuesday from the regulator. The $15 million incentive compensation paid to current and former Fenway consultants also reduced the fund’s return and wasn’t disclosed to investors.
“Fenway Partners and its principals breached their fiduciary obligation to fully and fairly disclose conflicted arrangements to a fund client,” Marshall Sprung, co-head of the division of enforcement’s asset management unit, said in the statement.
The Wall Street regulator has been probing the private equity industry on how fund managers divvy up expenses. The SEC had limited oversight over the firms until the 2010 Dodd-Frank Act. The legislation gave the agency greater authority over the funds, which are typically only open to institutions and wealthy investors.
Without admitting or denying the SEC’s findings, Fenway agreed to pay $8.7 million in disgorgement and interest. The firm and four executives also agreed to pay penalties totaling $1.5 million.
Eva Ciko Carman, an attorney for Fenway, didn’t immediately respond to a request for comment on the order.