The Securities and Exchange Commission has charged New Jersey-based investment adviser Energy Capital Partners Management LP (ECP) with allocating undisclosed, disproportionate expenses to a private equity fund it advises. ECP agreed to pay a $1 million penalty to settle the SEC charges and has voluntarily paid back more than $3.3 million to the fund.
According to the SEC’s order, ECP led an investment consortium to acquire the stock of a public company in what is referred to as a take-private transaction. In connection with this transaction, which closed in March 2018, ECP agreed that third-party co-investors would not have to bear expenses related to a credit facility used to finance the transaction.
As a result, the SEC’s order found that ECP allocated a disproportionate share of these expenses to a private equity fund it advised without disclosure. The SEC’s order found that, under the fund’s organisational documents, these expenses should have either been disclosed or not allocated in this manner.
ECP consented to the entry of the SEC’s order finding that the firm violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 and 206(4)-8. Without admitting or denying the SEC’s findings, ECP agreed to a cease-and-desist order and censure, in addition to the $1 million penalty.