According to the SEC, the company claimed that its funds charged investors an “industry standard 2 and 20” – misleading investors into believing that the funds charged fees in line with an often-used model by private funds which levy an annual management fee of 2%. fee and a performance fee of 20%. In fact, according to the SEC, the company collected 20% of the initial investment from investors, which is 10 years of 2% fees.
“AVG’s practices in assessing its management fees were inconsistent with what a reasonable investor would understand, absent additional disclosure, from AVG’s use of the term ‘industry standard'” , the SEC said in its order.
The regulator noted that several investors complained when they found out about the firm’s actual approach to fees, but that it “continued to use ‘industry standard’ 2 and 20 language.” even after receiving complaints from investors who learned that their capital contributions had been reduced by several years of management fees before being deployed in investment opportunities. »
The SEC said the company’s CEO approved of the “industry standard” language, “even though he didn’t know of any other industry adviser who was collecting the full multi-year management fee at the time.” of the fund investor’s initial investment.
He also said he “unreasonably believes” the assertion to be accurate “despite complaints AVG has received from investors, and in the face of questions about language put to it in 2017 by a board member. directors of AVG and an officer of AVG.”
Both the company and its CEO consented to the SEC order, without admitting or denying the SEC’s findings. They also agreed to a cease and desist order and AVG agreed to a censorship.
“Venture fund advisers, like all fund advisers, must accurately describe their fees and adhere to fund agreements,” said Adam Aderton, co-head of the division’s asset management unit. of the SEC’s application, in a statement.