SEC Charges New York-Based Investment Adviser with Failing to Disclose Conflicts of Interest

ADMINISTRATIVE PROCEEDING
File No. 3-22209

September 26, 2024 - The Securities and Exchange Commission today announced charges against Macellum Advisors, LP, a New York-based formerly registered investment adviser, for failing to disclose payments Macellum affiliates received from third party investment advisers and the resulting conflicts of interest. To settle the SEC's charges, Macellum agreed to pay a $75,000 penalty.

The SEC's order finds that Macellum failed to disclose that it had agreements with unaffiliated investment advisers pursuant to which the advisers invested their clients alongside Macellum's private funds in an activist investment strategy and paid Macellum affiliates a performance-based fee, which was equal to a fixed percent of any profits earned by the unaffiliated advisers in relation to the joint investment campaign. The order finds that these agreements posed a financial conflict of interest because they created an incentive for Macellum to potentially favor the interests of these outside entities over those of its clients, and Macellum failed to fully and fairly disclose the payments it received and the resulting conflicts of interest.

Macellum consented to the entry of the SEC's order finding that it violated Sections 206(2) and 206(4) of the Advisers Act and Advisers Act Rule 206(4)-7. In addition to the $75,000 penalty, Macellum agreed to a cease-and-desist order and censure.

The SEC's investigation was conducted by Luke Fitzgerald and supervised by Lee A. Greenwood, Andrew Dean, and Corey Schuster of the Division of Enforcement's Asset Management Unit. Shari Singh, Lawrence Chinsky, Rachel Lavery, and Jennifer Klein of the Division of Examination in the New York Regional Office assisted with the investigation.