Hedge fund managers and investment advisers periodically allocate client or fund assets to affiliated vehicles. The SEC remains highly attuned to the conflicts of interest inherent in those situations, including when an adviser improperly collects both a management fee from the client and an additional fee on the same client assets invested in the affiliated fund. That was precisely the case in the SEC’s recently settled enforcement proceeding against the principals of an investment adviser that used client funds to purchase shares in an affiliated mutual fund without providing adequate disclosure. See our three-part series on fee and expense allocations: “Practices Fund Managers Should Avoid” (Aug. 25, 2016); “Flawed Disclosures to Avoid” (Sep. 8, 2016); and “Preventing and Remedying Improper Allocations” (Sep. 15, 2016). This article summarizes the alleged improper conduct and the terms of the settlement. For coverage of a recent SEC enforcement action alleging similar issues, see “Undisclosed Increase in Investment Adviser’s Fees Could Result in Significant Penalties” (Jun. 23, 2016). Even an undisclosed “preference” for investing in proprietary funds can be problematic. See “Preference for Investing in Proprietary Hedge Funds Must Be Fully Disclosed by Investment Banks to Avoid Conflicts” (Jan. 7, 2016).