American Infrastructure Funds, an investment adviser to private funds, agreed to pay more than $1.6 million to settle SEC charges that the firm breached its fiduciary duty in three ways, the SEC announced in a news release Sept. 22.
"First, AIM violated its fiduciary duty entering into an agreement under which it accelerated a portfolio company monitoring fee without timely disclosure to clients or investors," the SEC wrote in a cease-and-desist order, dated Sept. 22. This also violated AIM's duty of care, the order found, as the firm failed to consider whether the fee acceleration was in its clients' best interest.
The firm and the SEC refer to American Infrastructure Funds as AIM for short.
AIM also violated its fiduciary duty when it transferred assets from a certain fund that it advised to a new fund it also advised, "without adequately disclosing its conflicts of interest, obtaining investor consent, or allowing investors to liquidate or exit their investment at the end of certain funds' term. The transfer effectively locked up client and investor money into the investment for an additional 11 years," the SEC said in the order.
In addition, the SEC said AIM violated its fiduciary duty by loaning money from one fund it advised to a new fund, managed by an affiliated adviser, without adequately disclosing its conflicts of interest or considering whether it was in the client's best interest.
"This case highlights our continued focus on holding private fund advisers responsible when they fail to act in their clients' best interests, including with respect to continuation funds," said Corey Schuster, co-chief of the SEC enforcement division's asset management unit, in the news release.
Without admitting or denying the SEC's findings, AIM agreed to the cease-and-desist order, a censure and a $1.2 million penalty, in addition to a payment of $445,460 in disgorgement and prejudgment interest to investors.
American Infrastructure Funds did not immediately respond to a request for comment.