Rialto Capital Management, Llc

Allegations: ON AUGUST 7, 2020, RIALTO ENTERED INTO A SETTLEMENT WITH THE SEC (THE "ORDER") WITHOUT ADMITTING OR DENYING ANY WRONGDOING WITH RESPECT TO CERTAIN OF RIALTO'S EARLIEST FUNDS, SPECIFICALLY RIALTO REAL ESTATE FUND, LP ("FUND I") AND RIALTO REAL ESTATE FUND II, LP ("FUND II") (COLLECTIVELY, THE "FUNDS"). THE ORDER STATES THAT RIALTO DID NOT PROVIDE SUFFICIENT DISCLOSURE AS PART OF ITS ANNUAL ADVISORY COMMITTEE APPROVAL PROCESS FOR CERTAIN REIMBURSABLE COSTS REGARDING (I) THE CALCULATION FOR CERTAIN REIMBURSABLE NON-PERSONNEL COSTS AND (II) STATEMENTS ABOUT MARKET RATES FOR THIRD PARTY TASKS RIALTO PERFORMED IN-HOUSE FOR FUND I. THE ORDER ALSO FOUND THAT RIALTO MISALLOCATED TO THE FUNDS COSTS AND EXPENSES RELATED TO ITS PERFORMANCE OF THIRD PARTY TASKS THAT SHOULD HAVE BEEN ALLOCATED TO RELATED CO-INVESTMENT VEHICLES RIALTO ALSO MANAGED. IN ADDITION, THE ORDER STATED THAT RIALTO DID NOT ADOPT AND IMPLEMENT ADEQUATE WRITTEN COMPLIANCE POLICIES OR PROCEDURES REGARDING THE FOREGOING. THE SEC CREDITED REMEDIAL ACTS PROMPTLY UNDERTAKEN BY RIALTO, AND RIALTO AGREED AS PART OF THE SETTLEMENT TO CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND FUTURE VIOLATIONS OF SECTIONS 206(2) AND 206(4) OF THE ADVISERS ACT (AS DEFINED HEREIN) AND RULES 206(4)-7 AND 206(4)-8 THEREUNDER AND TO PAY A CIVIL MONETARY PENALTY OF $350,000 TO THE SEC. Status: Final Sanction Detail: THE SEC CREDITED REMEDIAL ACTS PROMPTLY UNDERTAKEN BY RIALTO, AND RIALTO AGREED AS PART OF THE SETTLEMENT TO CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND FUTURE VIOLATIONS OF SECTIONS 206(2) AND 206(4) OF THE ADVISERS ACT (AS DEFINED HEREIN) AND RULES 206(4)-7 AND 206(4)-8 THEREUNDER AND TO PAY A CIVIL MONETARY PENALTY OF $350,000 TO THE SEC. Summary: THE SEC ADMINISTRATIVE ORDER IS FINAL. THE CIVIL PENALTY WAS PAID.