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Regulation

Yucaipa pays $3 million to settle claims from SEC of violating Investment Advisers Act

Yucaipa Cos. agreed to pay nearly $3 million to settle claims from the Securities and Exchange Commission accusing the firm of failing to disclose financial conflicts of interests and for misallocating fees and expenses, the agency said in a news release.

The SEC alleged that Yucaipa, which advises on several private equity funds, "negligently violated the antifraud provisions and the compliance rule" of the Investment Advisers Act of 1940 by failing to disclose to fund investors that the company charged the funds for costs accrued from preparing their tax returns.

It also failed to disclose arrangements with two unnamed third-party service providers, resulting in expense allocation decisions that posed conflicts of interest, according to the SEC. In addition, the SEC's order found that Yucaipa misallocated fees and expenses among the company, its funds and funds' portfolio investments and the personal investments of its principal, who was not identified by name in the order.

"Without admitting or denying the SEC's findings, Yucaipa consented to a cease-and-desist order, the payment of $1,934,312 in disgorgement and prejudgment interest and a $1 million civil penalty and an undertaking for an independent compliance consultant," the release said.

Representatives from Yucaipa did not immediately respond to a request for comment.