SEC Charges Private Equity Fund Adviser American Infrastructure Funds for Breaching Its Duties

The Securities and Exchange Commission today announced that American Infrastructure Funds LLC (AIM), a Foster City, California-based registered investment adviser to private funds, agreed to pay more than $1.6 million to settle charges resulting from its acceleration of portfolio company monitoring fees, for transferring a private fund asset from funds nearing the end of their term to a new fund, and for loaning money from one private fund to another private fund advised by an affiliate.

According to the SEC’s order, AIM breached its fiduciary duty to private funds that it advised by failing to adequately disclose its conflict of interest in receiving accelerated monitoring fees paid by a portfolio company when that portfolio company was sold. The SEC’s order also finds that AIM violated its duty of care by failing to consider whether the fee acceleration was in its clients’ best interest. Additionally, according to the SEC’s order, AIM breached its fiduciary duty by transferring certain expiring funds’ assets to a new private fund it also advised and, by doing so, locked up investor money for at least an additional decade without obtaining investor consent, without providing existing investors an option to exit, and without disclosing AIM’s conflicts of interest in the transaction. The SEC’s order finds that AIM also breached its fiduciary duty by not adequately disclosing its conflict of interest when it loaned money from one private fund it managed to a new private fund managed by an affiliated adviser and by failing to undertake a process to determine if the loan was in its clients’ best interest.

Source: SEC Charges Private Equity Fund Adviser American Infrastructure Funds for Breaching Its Duties