Rialto Capital Management to pay $350K penalty to settle SEC charges

1517
SHARE

As a result of the misallocation, Rialto mischarged Fund 1 and Fund II approximately $3 million more than their pro-rata share of costs and expenses for third party tasks.

Additionally, the Commission found that the firm failed to disclose that in 2012 to 2017 its cost allocation methodology calculation of third party tasks increased general overhead expenses.

Furthermore, the SEC found that Rialto failed to adopt and implement written compliance policies and procedures reasonably designed to prevent violations of the Advisers Act and its rules.

Rialto decided to settle without admitting or denying the findings of the Commission. In addition to the payment of the penalty, the firm agreed to cease-and-desist from committing or causing any violations and any future violations of Sections 206(2) and 206(4) of the Advisers Act, and Rules 206(4)-7 and 206(4)-8 thereunder. The firm also agreed to a censure.

As of December 31, 2019, Rialto had approximately $4.8 billion in assets under management. It includes approximately $4.3 billion in private equity funds and co-investment vehicles and around $470 million in separate accounts.