SEC Charges Venture Capital Fund Adviser with Misleading Investors

The Securities and Exchange Commission today charged venture capital fund adviser Alumni Ventures Group, LLC (AVG) with making misleading statements about its management fees and engaging in inter-fund transactions in breach of fund operating agreements. The SEC also charged AVG’s CEO, Michael Collins, with causing AVG’s violations. To settle the charges, AVG repaid $4.7 million to affected funds and agreed to pay a $700,000 penalty, whereas Collins agreed to pay a $100,000 penalty. According to the SEC’s order, AVG’s website and other marketing communications represented that its management fee for the venture capital funds that it managed was the “industry standard ‘2 and 20.’” The order found that these representations were misleading because they led some investors to believe that AVG would collect a two-percent management fee during each year of its funds’ 10-year term, and separately collect a 20-percent performance fee.