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SEC fines Lightyear $400K for co-invest disclosure issues

  • Lightyear has raised four flagship funds since 2000
  • Lighyear IV collected more than $957 mln in November 2017
  • Lightyear’s three employee pools had $3.7 mln in AUM

Lightyear Capital agreed to pay the SEC a $400,000 civil penalty to settle allegations that it improperly allocated expenses between its funds and co-investors.

The New York private equity firm did not admit or deny the findings.

The charges involve several different issues. Lightyear failed to disclose that it was not charging employee-related co-investment funds or other co-investors deal expenses, including those associated with broken deals, legal, consulting or insurance, SEC said in a cease and desist order dated Dec. 26.

Co-investors benefited from exposure to such deals but did not have to pay their portion of deal expenses, the SEC said. Lightyear’s flagship funds paid about $167,000 more in expenses than they should have from 2000 to 2016, the regulator said.

Also, certain co-investors were allowed to invest in certain portfolio companies but didn’t have to pay their share of post-closing expenses, the SEC said. Due to this conduct, Lightyear’s flagship funds paid about $221,000 more in expenses than they should have from 2000 to 2016, the regulator said.

The firm also didn’t properly offset management fees in connection with undisclosed “fee-sharing agreements” with certain co-investors, the SEC said. Co-investors received about $1 million from two portfolio companies without providing any services for the fees, the filing said.

Lightyear, a financial-services-focused PE firm, has raised four flagship funds since 2000. The flagships had about $2.11 billion in assets under management as of Dec. 31, 2017. Lightyear’s most recent flagship, Fund IV, raised more than $957 million in November 2017, Buyouts reported.

Lightyear also has three employee pools that co-invest alongside the flagships. The employee funds had about $3.7 million in AUM as of Dec. 31, 2017.

Lightyear could not immediately be reached for comment.

Action Item: Contact Mark Vassallo, Lightyear’s managing partner, at +1 212-328-0555