WASHINGTON — The US Securities and Exchange Commission (SEC) on Friday said it ordered venture capital fund Alumni Ventures Group LLC (AVG) to repay $4.7 million to affected funds and pay a $700,000 penalty for making misleading fee statements and breaching operating agreements.
Without admitting or denying the allegations by the Wall Street regulator, the New Hampshire-based fund will pay the penalty and its chief executive, Michael Collins, agreed to pay a $100,000 fine, the SEC said in its order.
Friday’s charges allege that while AVG’s marketing communications represented that it had an “industry standard” management fee, the representations “led some investors to believe that AVG would collect a two-percent management fee during each year of its funds’ 10-year term, and separately collect a 20-percent performance fee.”
Instead, AVG’s typical practice was to assess management fees totaling 20 percent of an investor’s fund investment, which represented ten years of two-percent annual management fees.
The charges come as the Democratic-led SEC has stepped up scrutiny around private funds, including a measure meant to boost the disclosures of fees charged to investors.
“Venture capital fund advisers, like all advisers to funds, must accurately describe their fees and abide by the funds’ agreements,” said Adam Aderton, who co-leads the enforcement division’s agency’s asset management unit.
“When appropriate, enforcement actions like this one hold firms accountable when they fail to meet these obligations.” (Reporting by Katanga Johnson in Washington Editing by Matthew Lewis)