- Firm allocated $455,000 in legal and compliance fees to funds
- Fees included legal tab for SEC investigation into expense allocations
- Firm pays SEC fine and reimburses funds for full amount
Cherokee Investment Partners racked up $171,232 in expenses when it registered as an investment adviser with the SEC.
The Raleigh, North Carolina-based firm paid another $239,362 for legal and consulting services when the SEC conducted an examination in 2013. Cherokee then forked over $45,104 to lawyers when the SEC conducted an investigation of the firm’s fund expenses.
Cherokee made one mistake: The private equity and real estate firm billed all of those compliance-related expenses to three of its flagship funds. Now, it will pay a $100,000 penalty to settle SEC sanctions for improperly allocating firm expenses to its funds. The firm reimbursed its funds for the full $455,698 in April.
“The limited partnership agreements did not disclose that the funds would be charged for a portion of the advisers’ own legal and compliance expenses,” the SEC wrote in its findings.
Cherokee, which is led by Tom Darden and John Mazzarino, complied with the SEC’s investigation. The firm did not admit or deny the regulator’s findings.
The firm could not be reached for comment.
Cherokee’s third fund, a 2005 vintage, was generating a -18.24 percent IRR as of June 30, 2014, according to the North Carolina Retirement System. The firm’s 2002 vintage fund was also in the red, posting a -30.95 percent IRR as of the same date.
Action Item: Read the SEC’s order here: http://1.usa.gov/1SwrhE4
Photo: The U.S. Securities and Exchange Commission logo adorns an office door at the SEC headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst