Colony Capital Fined $350K for Failing to Disclose Affiliate Deals

Colony Capital Investment Advisors was fined $350,000 by the SEC for failing to disclose and obtain required approvals for affiliate transactions involving its managed real estate funds between 2017 and 2021.

September 06, 2024

Colony Capital Investment Advisors LLC has been fined $350,000 by the U.S. Securities and Exchange Commission for not following required procedures regarding disclosures and approvals for affiliate transactions related to its managed private real estate funds.

The SEC found that from 2017 to 2021, Colony did not obtain necessary pre-approvals or disclose approximately 40 affiliate agreements involving services such as fund administration and asset management, as mandated by fund partnership agreements. These agreements required pre-disclosure to limited partners and approval from advisory committees or a majority of the limited partners.

In some instances, Colony disclosed the transactions after the expenses were incurred, but the SEC noted that these disclosures did not meet the required timeline. The firm also failed to promptly notify an advisory committee about specific expenses related to a fund. Additionally, Colony was found to lack adequate policies and procedures to ensure compliance with the Investment Advisers Act, including guidelines on handling affiliated service providers and determining arm’s-length transactions.

The SEC emphasized that Colony violated several sections of the Advisers Act but acknowledged the firm’s cooperation during the investigation. Colony also voluntarily reimbursed the affected funds. Without admitting or denying the allegations, Colony agreed to the cease-and-desist order, the censure, and the $350,000 civil penalty.

Colony Capital Investment Advisors LLC manages private equity funds and, as of May 2024, held approximately $802 million in regulatory assets under management.