News & Insights

SEC Charges Boston-Based Registered Investment Adviser and Its Managing Partner for Failing to Disclose Conflicts of Interest

What happened?

On December 20, 2024, the SEC announced settled charges against Rose Park Advisors, LLC (“Rose Park”), a Boston registered investment adviser, and its managing partner, Matthew Q. Christensen (“Christensen”). The charges stemmed from failing to disclose significant conflicts of interest related to investments made by one of their clients (“the Fund”), which invested nearly $50 million in a portfolio company run by Christensen’s uncle.

Familial and Financial Connections

The portfolio company’s CEO is not only Christensen’s uncle, but the CEO also serves as trustee for three trusts that were among the top five largest investors in the Fund. Further, Christensen is a beneficiary of these trusts, and the CEO entered into a series of transactions where the trust guaranteed to repay Christensen a line of credit.

Rose Park failed to disclose these connections in the quarterly updates provided to investors in the Fund. Rose Park’s quarterly updates explain to investors in the Fund the basis for investing in the portfolio company in the context of its investment framework. However, certain quarterly updates failed to disclose the familial relationship and the financial connection between the portfolio company and Christensen, rendering them omissions of material facts necessary to make the statements made, in light of the circumstances under which they were made, not misleading.

The SEC found that this conduct and the omissions violated several provisions of the Investment Advisers Act of 1940 (the “Advisers Act”), including anti-fraud provisions. Rose Park and Christensen agreed to a settlement without admitting or denying the findings, paying civil penalties of $550,000 and $50,000, respectively.

What does this mean for me?

This case underscores the critical importance of disclosing conflicts of interest in client relationships. For advisers, it serves as a reminder to ensure robust policies and procedures are in place to identify and assess any conflicts of interest, whether familial, financial, or otherwise. Further, proactive, thorough disclosure of actual and potential conflicts of interest in client communications, investor updates, and other materials is essential to maintaining compliance with the anti-fraud provisions of the Advisers Act.

The reputational and financial risks associated with inadequate disclosure of conflicts of interest are vast. By addressing conflicts proactively, you can protect your clients’ interests, reinforce trust, and avoid the risk of monetary penalties.