Lightyear Capital, a personal fairness agency that makes a speciality of monetary providers, has settled with the Securities and Alternate Fee over allegations associated to its expense allocation and fee-sharing practices. With out admitting or denying the findings, the agency has agreed to pay a $400,000 high-quality.
Lightyear is a well-recognized identify in wealth administration because of its investments in monetary advisory companies, together with unbiased dealer/vendor community Advisor Group and registered funding advisors Wealth Enhancement Group and HPM Companions. It’s additionally the earlier proprietor of Cetera Monetary, which Lightyear offered to RCS Capital in 2014. RCAP has since gone bankrupt, inflicting Cetera to emerge as a personal firm. This summer time, Genstar Capital acquired a majority stake within the firm.
The agency manages 4 flagship non-public fairness funds, in addition to three worker funds, which make investments alongside these funds. In accordance with the SEC, the agency allotted sure bills, together with damaged deal, authorized, consulting, insurance coverage and different bills, to the flagship funds, whereas the agency didn't allocate a proportional share to the worker funds. The agency ought to have disclosed the battle to traders, the SEC claims. Consequently, shareholders within the flagship funds paid $167,000 extra in bills from 2000 to 2016.
“The failure to allocate such bills to the Worker Funds and the allocation of these bills to the Flagship Funds benefitted Lightyear’s Worker Funds on the expense of the Flagship Funds,” the declare says.
A Lightyear spokesman declined to remark.
The SEC additionally discovered that co-investors weren't expensed correctly, and, once more, Lightyear did not disclose that to flagship funds traders. That resulted in traders paying a further $221,000 extra in bills than they need to have over the 16-year interval.
The regulator additionally discovered fault in Lightyear’s fee-sharing practices. The agency had preparations in place the place it acquired charges for offering advisory providers to its portfolio firms; these charges have been alleged to offset administration charges paid by the flagship funds, in accordance with its disclosures. However, between 2010 and 2015, $1 million of these charges went to co-investors, rising the administration charges paid by the flagship funds.
“Whereas the Flagship Fund LPAs permitted the final accomplice of the Flagship Funds to barter totally different funding phrases for co-investors, Lightyear didn't disclose both the fee-sharing agreements or the funds within the Organizational Paperwork or elsewhere,” the claims says. “Lightyear’s failure to reveal these agreements and failure to supply the Flagship Funds with the related administration price offsets benefitted the co-investors on the expense of the Flagship Funds.”