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Garrison Investment, Garrison Capital Advisers settle SEC charges for $250,000

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Garrison Investment, Garrison Capital Advisers settle SEC charges for $250,000

Garrison Investment Group LP and Garrison Capital Advisers LLC agreed to pay $250,000 to settle the Securities and Exchange Commission's charges stemming from a series of loan transactions in which Garrison Capital's client, Garrison Capital Inc., participated alongside Garrison Investment's private fund clients and third party co-investors.

On Nov. 21, 2012, the respondents sought relief from the SEC to allow Garrison Capital Inc. to participate in loan transaction with certain private funds managed by Garrison Investment and its affiliates. While the application and several amendments were pending, respondents effected nine loan transactions. They later effected seven more loan transactions after the SEC issued an order that allowed Garrison Capital Inc. to participate in loan transactions with affiliates if Garrison Investment and Garrison Capital Advisers complied with certain conditions. They, however, did not comply with the order due to the participation of the parties not listed in the application and because the co-investors paid Garrison Investment their pro-rata portion of the upfront fee revenue for services it performed.

According to the SEC, the companies also violated the Investment Advisers Act because an affiliate maintained custody of client assets without subjecting it to a surprise examination by an independent public accountant and because Garrison Investment pooled advisory client assets in a bank account with its own fee revenue.