The SEC recently brought an enforcement action against an unregistered private fund adviser and its principal, alleging they defrauded a private fund client and its investors.[i] The action is consistent with Chair Paul Atkins’ stated commitment to get “back to basics” by targeting conduct that directly harms investors, particularly in the private fund space.[ii]
What Happened
The SEC’s complaint alleges that an unregistered adviser and its principal defrauded investors in a private fund that, based on the latest Form D filing, raised $13 million (of which approximately $2.2 million had been contributed).[iii] Among the allegations, the defendants paid themselves more than $515,000 in management fees — representing more than 3.9% of the aggregate capital commitments and 23% of the capital contributions to the fund — in contravention of the fund documents.[iv] For perspective, the fund’s offering and governing documents included conflicting management fee formulas, with the fee set to 2% of capital commitments (in the fund’s PPM) or 2% of the “gross value” of the fund’s assets (in the fund’s partnership agreement); an amount far less than the actual amount paid.
The SEC also alleges that the defendants failed to deliver financial statements to investors, violating the fund’s limited partnership agreement and depriving investors of basic visibility into how their capital was being managed.
Beyond the fee and reporting failures, the complaint alleges that the defendants made material misrepresentations to investors about the fund’s operations. According to the SEC, the defendants misrepresented fund subscription information and fund investments, the fund’s audit status, and the principal’s credentials.[v]
Why It Matters
This action reinforces that, even in a period of reduced overall enforcement activity and staffing changes at the SEC, private fund adviser misconduct — particularly fee-related abuses and misrepresentations to investors — remains a core enforcement priority.[vi] The fact that this case involves an unregistered adviser managing a relatively small pool of capital sends a clear signal: The SEC is not limiting its scrutiny to larger firms, or even to firms that are registered investment advisers.
The action also fits a pattern of recent enforcement activity in the private fund space. In 2025, the SEC brought cases involving improper management fee offset calculations, undisclosed conflicts of interest, and material misstatements in marketing and offering materials.[vii] Looking ahead, industry observers expect a continued enforcement focus on fee and expense practices, disclosure adequacy and conflicts of interest — areas that the SEC’s Division of Examinations also flagged in its 2026 examination priorities.[viii]
Key Takeaways for Private Fund Sponsors
This action highlights several recurring themes in SEC enforcement matters involving fund sponsors (whether registered investment advisers, exempt reporting advisers or firms that should register or file), including:
- Fee arrangements and calculations and their consistency with governing fund documents remain subject to heightened oversight. The SEC continues to scrutinize management fee practices, and even relatively small overcharges can draw enforcement attention.[ix]
- Disclosure obligations extend to all material information. Failures to deliver financial statements, overstatements of fund performance or assets, and misrepresentations concerning audit or registration status are the types of conduct that the SEC has made clear it will pursue.
- Unregistered status does not insulate from enforcement. The Advisers Act’s antifraud provisions apply broadly, and the SEC has shown a willingness to bring cases under Sections 206(2) and 206(4) on a negligence standard, including against unregistered advisers.[x]
- Compliance infrastructure matters. SEC actions have focused on fee billing and offset methodologies, investor reporting practices and the accuracy of marketing and offering materials against governing fund documents.
The enforcement environment under Atkins may feature fewer total actions than in prior years, but the cases the SEC does bring will be focused on real investor harm.[xi] For private fund sponsors, recent activity indicates that misconduct, particularly fee overcharges and investor deception, will continue to draw SEC attention.
McGuireWoods continuously monitors SEC enforcement trends and regulatory developments affecting private fund sponsors and investment managers. For more information, contact one of the authors or a member of the Fund Formation & Investment Management Practice Group.
[i] Litigation Release No. 26525, SEC v. Backswing Ventures GP LLC and Kyle James Asman, (M.D. Fla. Apr. 9, 2026), available at https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26525.
[ii] See Speech, Chairman Paul S. Atkins, Prepared Remarks Before SEC Speaks (May 19, 2025).
[iii] See Litigation Release No. 26525,supra note 1.
[iv] Id.
[v] Id.
[vi] See Press Release, SEC, SEC Announces Enforcement Results for Fiscal Year 2025 (Apr. 7, 2026), available at https://www.sec.gov/newsroom/press-releases/2026-34 (reporting 456 enforcement actions in FY 2025, down from 583 in FY 2024, reflecting a “deliberate refocus” on matters of fraud and investor harm).
[vii] See, e.g., Press Release, SEC, SEC Charges New York-Based Investment Adviser with Breaching Fiduciary Duty by Overcharging Management Fees to Private Funds (Aug. 15, 2025), available at https://www.sec.gov/enforcement-litigation/administrative-proceedings/ia-6908-s; Litigation Release No. 26393, SEC v. Vukota Capital Management, LLC et al. (D. Colo. Sept. 9, 2025), available at https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26393.
[viii] See Press Release, SEC, SEC Division of Examinations Announces 2026 Priorities (Nov. 17, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-132-sec-division-examinations-announces-2026-priorities; see also SEC Division of Examinations, 2026 Examination Priorities (Nov. 17, 2025), available at https://www.sec.gov/files/2026-exam-priorities.pdf.
[ix] See Administrative Proceedings, In the Matter of TZP Management Associates, LLC, File No. 3-22511 (Aug. 15, 2025), available at https://www.sec.gov/enforcement-litigation/administrative-proceedings/ia-6908-s (SEC charged registered investment adviser with breaching fiduciary duty through improper fee offset calculations resulting in more than $500,000 in excess management fees).
[x] See Litigation Release No. 26393, SEC v. Vukota Capital Management, LLC et al. (D. Colo. Sept. 9, 2025), available at https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26393 (SEC brought negligence-based claims under Sections 206(2) and 206(4) of the Advisers Act against unregistered adviser entities and their principal for fiduciary breaches and misrepresentations to private fund investors).
[xi] See Press Release, SEC, SEC Announces Enforcement Results for Fiscal Year 2025 (Apr. 7, 2026), available at https://www.sec.gov/newsroom/press-releases/2026-34.