SEC Charges Hudson Advisors and Lone Star Global for Failing to Disclose that Fund Fees Included More Than $50 Million of Owner’s Income Tax Liability

The Securities and Exchange Commission announced charges today against registered investment advisers Hudson Advisors L.P. and Lone Star Global Acquisitions Ltd. for including Hudson’s owner’s anticipated income tax liability as a component of certain fees charged to 14 private equity funds they managed. Hudson and Lone Star Global have agreed to pay $11.2 million in civil penalties and have reimbursed the affected funds $68.5 million, which includes interest on the undisclosed tax liability charges. According to the SEC’s order, between at least 2005 and 2017, Hudson included $54.6 million of its owner’s anticipated U.S. tax liability in fees charged to the funds. By law, these tax liabilities were payable by the owner rather than by Hudson.