It is common for private equity managers to use certain fees they receive from portfolio companies to offset a portion of the management fees owed to the manager by investors in the fund. While this custom is undeniably investor-friendly, the SEC has repeatedly taken issue with how managers calculate these management fee offsets and the level of disclosure provided to investors about those calculations. See “Proper Disclosure of Fee and Expense Allocations Is Crucial for Managers to Avoid SEC Enforcement Action” (Sep. 1, 2016); “Expense Allocation and Fee Practices Fund Managers Should Avoid to Reduce Risk of SEC Scrutiny (Part One of Three)” (Aug. 25, 2016); and “Full Disclosure of Portfolio Company Fee and Payment Arrangements May Reduce Risk of Conflicts and Enforcement Action” (Nov. 12, 2015). The SEC recently settled an enforcement action against a private equity manager for failing to disclose that, in certain circumstances, the methodology it used when calculating its management fee offset caused investors to pay a higher management fee than if other methods had been employed. Despite taking steps to remedy the alleged violations, including reimbursing excess fees and providing additional disclosure to investors, the SEC has imposed a multi-million dollar civil penalty on the manager. This article summarizes the allocation practices challenged by the SEC, the specific violations alleged and the other key provisions of the settlement order. This enforcement action by the SEC is the latest in a string of actions concerning fee and expense practices, including with respect to legal fees; broken deal expenses; failure to follow allocation policies; and allocation methodology.