Many CFOs at private equity fund advisors also serve as CCOs. It’s important that someone wearing both hats also receive quality supervision.
This lesson appears in a new SEC enforcement settlement involving Corinthian Capital Group ($248 million in AUM) in New York. The firm agreed to pay a $100,000 fine and its CEO and founder Peter Van Raalte was ordered to pay $25,000 and its former CFO-CCO David Tahan agreed to pay $15,000.
The case touches on many of the hot compliance buttons affecting PE fund advisors, including expenses, fee offsets and custody and grew out of an OCIE exam in 2014. Three years later, the advisor’s auditor withdrew its unqualified opinion because Corinthian had misclassified expenses.
The advisor also missed its 120-day deadline to issue audited financials to investors,For three years, meaning the firm violated the custody rule.
The SEC focused its attention on a unique provision in the advisor’s fund’s LPA, which permitted a “deemed contribution” for certain limited partners. The regulator said the provision would permit some partners to skip 80 percent of a capital call and other investors would have to make up the difference. In exchange, the investors pouring in extra cash would get an offset against their management fees.