Potomac Asset Management Co Inc

Allegations: MISALLOCATION OF FEES AND EXPENSES, FAILURE TO ADOPT WRITTEN POLICIES AND PROCEDURES REASONABLY TAILORED TO PREVENT VIOLATIONS, FAILURE TO MAKE CAPITAL CONTRIBUTIONS. Status: Final Sanction Detail: $300,000.00 PAYABLE AS FOLLOWS: $50,000.00 WITHIN 10 DAYS, $50,000.00 WITHIN 180 DAYS, $200,000.00 WITHIN 360 DAYS. Summary: WITHOUT ADMITTING OR DENYING THE SEC'S FINDINGS, PAM CONSENTED TO THE ENTRY OF A SETTLEMENT ORDER, ENTERED BY THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 11, 2017 (THE "SETTLEMENT ORDER"), WHICH INCLUDED A FINDING THAT IT VIOLATED SECTIONS 206(2), 206(4) AND 207 OF, AND RULES 206(4)-2, 206(4)-7 AND 206(4)-8 UNDER, THE ADVISERS ACT. THE SETTLEMENT ORDER PRIMARILY ADDRESSES THE MISALLOCATION OF CONSULTING FEES AND OTHER EXPENSES BETWEEN PAM AND THE FUNDS. IN PARTICULAR, THE SETTLEMENT ORDER FOCUSES ON: (I) THE USE OF PEF ASSETS TO PAY FOR CONSULTING SERVICES PROVIDED BY PAM AFFILIATES IN CONNECTION WITH PEF INVESTMENTS IN A PEF PORTFOLIO COMPANY, AND ASSOCIATED MANAGEMENT FEE OFFSETS, AND (II) THE USE OF THE FUNDS' ASSETS TO PAY FOR CERTAIN OTHER CONSULTING FEES AND EXPENSES RELATED TO OPERATIONS OF THE FUNDS. THE SETTLEMENT ORDER ALSO ADDRESSES DISCLOSURE FAILURES AND CUSTODY RULE VIOLATIONS RESULTING FROM THE MISALLOCATED FEES AND EXPENSES, AND THE FAILURE ON THE PART OF THE GENERAL PARTNER TO MAKE TIMELY CAPITAL CONTRIBUTIONS TO THE FUNDS. THE SETTLEMENT ORDER FURTHER FOUND THAT PAM DID NOT ADOPT OR IMPLEMENT ADEQUATE WRITTEN POLICIES AND PROCEDURES REASONABLY DESIGNED TO PREVENT THE VIOLATIONS NOTED IN THE ORDER. AS NOTED IN THE SETTLEMENT ORDER, PAM CONDUCTED A COMPLIANCE REVIEW DURING THE INVESTIGATION, ADOPTED A NUMBER OF COMPLIANCE UPGRADES AND CONTROLS, AND VOLUNTARILY REIMBURSED THE FUNDS WITH INTEREST FOR IDENTIFIED FEES AND EXPENSES. THE SETTLEMENT ORDER CREDITS PAM FOR THESE REMEDIAL STEPS AND ITS COOPERATION DURING THE INVESTIGATION. THERE WERE NO FINDINGS OR ALLEGATIONS IN THE SETTLEMENT ORDER OF INTENTIONAL MISCONDUCT OR RECKLESSNESS ON THE PART OF THE PAM.

Allegations: IMPROPER ALLOCATION OF FEES AND EXPENSES TO TWO VENTURE CAPITAL FUND CLIENTS; FAILURE TO IMPLEMENT WRITTEN POLICIES AND PROCEDURES REASONABLY DESIGNED TO PREVENT VIOLATIONS; FAILURE OF GENERAL PARTNER TO MAKE TIMELY CAPITAL CONTRIBUTIONS. Status: Final Sanction Detail: $300,000.00 PAYABLE AS FOLLOWS: $50,000.00 WITHIN 10 DAYS, $50,000.00 WITHIN 180 DAYS, $200,000.00 WITHIN 360 DAYS. Summary: WITHOUT ADMITTING OR DENYING THE SEC'S FINDINGS, POTOMAC ASSET MANAGEMENT COMPANY, INC. ("PAM") CONSENTED TO THE ENTRY OF A SETTLEMENT ORDER, ENTERED BY THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 11, 2017 (THE "SETTLEMENT ORDER"), WHICH INCLUDED A FINDING THAT IT VIOLATED SECTIONS 206(2), 206(4) AND 207 OF, AND RULES 206(4)-2, 206(4)-7 AND 206(4)-8 UNDER, THE ADVISERS ACT. THE SETTLEMENT ORDER PRIMARILY ADDRESSES THE MISALLOCATION OF CONSULTING FEES AND OTHER EXPENSES BETWEEN PAM AND THE FUNDS. IN PARTICULAR, THE SETTLEMENT ORDER FOCUSES ON: (I) THE USE OF FUND ASSETS TO PAY FOR CONSULTING SERVICES PROVIDED BY PAM AFFILIATES IN CONNECTION WITH FUND INVESTMENTS IN A FUND PORTFOLIO COMPANY, AND ASSOCIATED MANAGEMENT FEE OFFSETS, AND (II) THE USE OF THE FUNDS' ASSETS TO PAY FOR CERTAIN OTHER CONSULTING FEES AND EXPENSES RELATED TO OPERATIONS OF THE FUNDS. THE SETTLEMENT ORDER ALSO ADDRESSES DISCLOSURE FAILURES AND CUSTODY RULE VIOLATIONS RESULTING FROM THE MISALLOCATED FEES AND EXPENSES, AND THE FAILURE ON THE PART OF THE GENERAL PARTNER TO MAKE TIMELY CAPITAL CONTRIBUTIONS TO THE FUNDS. THE SETTLEMENT ORDER FURTHER FOUND THAT PAM DID NOT ADOPT OR IMPLEMENT ADEQUATE WRITTEN POLICIES AND PROCEDURES REASONABLY DESIGNED TO PREVENT THE VIOLATIONS NOTED IN THE ORDER. AS NOTED IN THE SETTLEMENT ORDER, PAM CONDUCTED A COMPLIANCE REVIEW DURING THE INVESTIGATION, ADOPTED A NUMBER OF COMPLIANCE UPGRADES AND CONTROLS, AND VOLUNTARILY REIMBURSED THE FUNDS WITH INTEREST FOR IDENTIFIED FEES AND EXPENSES. THE SETTLEMENT ORDER CREDITS PAM FOR THESE REMEDIAL STEPS AND ITS COOPERATION DURING THE INVESTIGATION. THERE WERE NO FINDINGS OR ALLEGATIONS IN THE SETTLEMENT ORDER OF INTENTIONAL MISCONDUCT OR RECKLESSNESS ON THE PART OF THE PAM.