SECOn November 3, 2015, the Securities and Exchange Commission (SEC) announced that it had reached a settlement with Fenway Partners, LLC, a New York-based private equity firm, and several of the firm’s executives (the Respondents) in connection with a failure to disclose conflicts of interests to investors with respect to payments made by portfolio companies of a private equity fund to certain affiliates and former employees of the firm. In settlement of the matter, the respondents agreed to collectively disgorge approximately $8.7 million, and pay an approximately $1.5 million civil monetary fine.

This demonstrates that the SEC staff remains focused on related party transaction and compensation arrangements between and among an adviser’s affiliated entities which have the potential to result in actual or apparent conflicts of interest. Private fund advisers should specifically review disclosures concerning any consulting, management, monitoring or other services agreements between the adviser (and/or its affiliates) and fund portfolio companies to ensure that adequate disclosure of the relationships and any related compensation arrangements have been made to fund investors.

Read the full post on our Corporate Defense and Disputes Blog.

Posted in Compliance, Disputes, Private Equity, Regulation, SEC
Tags: Conflicts of Interest, Disclosures, Fees and Expenses, Portfolio Companies, Related-Party Transactions
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Photo of Timothy W. Mungovan Timothy W. Mungovan

Tim Mungovan is the Chair of Proskauer.  He is also the immediate past chair of the Firm’s Litigation Department and head of the Securities Litigation practice.

His practice is focused on securities, commercial litigation, governance, and bankruptcy-related matters. He has a national reputation…

Tim Mungovan is the Chair of Proskauer.  He is also the immediate past chair of the Firm’s Litigation Department and head of the Securities Litigation practice.

His practice is focused on securities, commercial litigation, governance, and bankruptcy-related matters. He has a national reputation for advising sponsors of private investment funds (hedge, private equity, private credit and venture capital) in a wide variety of matters, including litigation, governance, securities, fiduciary obligations, and regulatory enforcement.

Chambers USA describes Tim as “an extraordinary lawyer who is a fierce and very talented litigator. He is extremely knowledgeable, responsive and client-oriented.” Best Lawyers in America lauds Tim’s experience, integrity, work ethic, communications and courtroom skills. Tim has been listed in the “Top 100 Lawyers” in Massachusetts, and Benchmark Litigation has continually recognized Tim as a Litigation Star in Massachusetts.

Over the last six years, Tim has been the lead litigator representing the Financial Oversight and Management Board for Puerto Rico in the historic restructuring of Puerto Rico’s debts. The scale and complexity of this restructuring has resulted in one of the most active litigation dockets in the U.S. Almost every aspect of the litigation involved matters of first impression in part because the restructuring is governed by the Puerto Rico Oversight, Management, and Economic Stability Act, which was enacted for Puerto Rico in 2016.  The track record of success speaks for itself:  in the more than 150 lawsuits filed, Tim and the Proskauer team have prevailed in almost 95% of the cases.

Tim is recognized nationally for his experience in private fund litigation and disputes, having focused on the industry for more than 25 years.  As part of that focus, Tim created and is the lead editor of Proskauer’s blog on Private Equity litigation, The Capital Commitment.

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Photo of Michael Suppappola Michael Suppappola

Mike Suppappola is a partner in the Private Funds Group who specializes in representing asset managers across the globe in all aspects of their business and operations, with a particular focus on fund formation and the structuring and execution of secondary transactions. Mike…

Mike Suppappola is a partner in the Private Funds Group who specializes in representing asset managers across the globe in all aspects of their business and operations, with a particular focus on fund formation and the structuring and execution of secondary transactions. Mike also counsels clients on co-investments, portfolio investments and day-to-day operational and regulatory matters.

He advises a broad spectrum of fund sponsors who pursue a variety of strategies and sectors across North America, Europe and Asia, including buyout, private credit, secondaries, distressed and special situations, growth equity, venture capital, real estate and funds-of-funds. After the fundraising period, Mike continues to serve as a trusted adviser throughout the lifespan of a fund, with a focus on general partner and management company internal governance and day-to-day operational issues.

Mike is widely recognized in the private funds industry for his extensive experience in representing secondary fund managers in connection with all aspects of their business, including fund formation, secondary transactions (including GP-led liquidity processes, private tender offers, tail-end sales and preferred equity transactions), primary investments and co-investments. He also provides ongoing advice to private fund managers and other investment advisers on legal and regulatory compliance with federal and state securities laws, with particular expertise on the Investment Advisers Act of 1940.

An active member of the private funds community, Mike is frequently invited to lecture at industry events on business and regulatory topics. He is recognized as a top practitioner in Chambers, Legal 500, IFLR 1000 and Lawdragon Insights: Private Funds, where clients praise him as “extremely well respected,” “thorough and [with] a good sense for what’s important,” and commend his ability to “’get to the bottom line very quickly.” Mike has been published or quoted in numerous industry publications and treatises, including Private Equity International Modern Fundraiser, U.S. Private Equity Fund Compliance Companion, Private Equity International, Secondaries Investor, Private Funds Management, PE Manager, Compliance Intelligence and Regulatory Register.

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