A Denver-based alternative fund manager agreed Monday to refund investors $5.4 million after the Securities and Exchange Commission charged the firm with levying excessive management fees and misleading investors about how it valued certain assets.
Equinox Fund Management LLC calculated management fees “contrary to the method described in registration statements for a managed futures fund called The Frontier Fund (TFF), and the firm also deviated from its disclosed valuation methodology for some TFF holdings,” according to the SEC.
The excessive management fees were collected by Equinox during a seven-year period. The firm must also pay $600,000 in prejudgment interest and a $400,000 penalty.
“Fund managers can’t tell investors one thing and do another when assessing fees and valuing assets,” said Marshall Sprung, co-chief of the SEC Enforcement Division’s Asset Management Unit. “Equinox’s misleading disclosures gave investors a distorted picture of how the firm determined compensation and valued significant fund holdings.”
According to the SEC’s order instituting a settled administrative proceeding, while TFF’s registration statements disclosed that Equinox charged management fees based upon the net asset value of each series, Equinox actually used the notional trading value of the assets, which is the total amount invested including leverage. Equinox consequently overcharged the fund $5.4 million in fees from 2004 to 2011.