California private equity to pay $1.25 million over improper withdrawal from funds

Linus Unah – Fourth Estate Contributor

Washington, D.C., United States (4E) – The U.S. Securities and Exchange Commission (SEC) Tuesday announced that a private equity adviser has been permanently barred from the securities industry and must pay $1.25 million in penalties to settle claims he withdrew funds from two private equity funds he managed and transferred money to a personal account.

According to the SEC’s order, Scott M. Landress formed the funds to invest in real estate trusts with underlying investments in properties throughout the UK.

The SEC said his investment advisory firm SLRA Inc. earned management fees based on the net asset value of the investments.

SLRA’s fees shrank and its management costs increased as real estate property values fell during the financial crisis, according to the SEC.

The U.S. regulator added that the funds’ limited partners declined several requests by Landress ,55, for additional compensation to cover the shortfalls.

According to the SEC’s order, Landress directed the firm to withdraw 16.25 million pounds from the funds in early 2014, purportedly as payment for several years of services provided by an affiliate.

He subsequently transferred the money to his personal account.

SLRA and Landress did not disclose the related-party transaction and the resulting conflicts of interest until after the money had been withdrawn.

According to the SEC’s order, Landress and SLRA returned the withdrawn service fees to the funds after the SEC began its investigation.

“Private equity fund advisers have a duty to act in the best interest of their clients, but Landress and SLRA helped themselves to millions of dollars’ worth of fees to which they had no legitimate claim,” said Scott W. Friestad , associate director of the SEC’s enforcement unit.

Landress and SLRA agreed to the SEC’s cease-and-desist order without admitting or denying the findings.

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