The SEC recently settled an enforcement action against a private equity manager, serving as the latest reminder to investment advisers that they must scrupulously adhere to the terms of their disclosures when it comes to allocating fees and expenses to funds, particularly expenses incurred (or discounts obtained) by the adviser itself. In the action, the SEC claimed that the private equity manager, without providing adequate disclosure to fund investors, inappropriately allocated overhead expenses of manager affiliates to two private funds, charged certain funds liability insurance premiums in contravention of the funds’ governing documents and negotiated a legal fee discount for itself while its funds paid the same law firm full price for the same services. Within the settlement order, the SEC also reiterated its view that conflicts of interest that have not been adequately disclosed to or approved by investors (or, where appropriate, their representatives) should be resolved in favor of the investors. See “SEC Enforcement Director Highlights Increased Focus on Undisclosed Private Equity Fees and Expenses” (May 19, 2016). This article summarizes the underlying facts, the SEC’s allegations, the remedial actions undertaken by the manager and the terms of the settlement. For a comprehensive look at private fund fee and expense allocation practices, see our three-part series: “Practices Fund Managers Should Avoid” (Aug. 25, 2016); “Flawed Disclosures to Avoid” (Sep. 8, 2016); and “Preventing and Remedying Improper Allocations” (Sep. 15, 2016).