In the Matter of Lincolnshire Management, Inc.

Lincolnshire Management, Inc. (LMI), an investment adviser registered with the Securities and Exchange Commission (SEC), was the adviser to two private-equity funds, Lincolnshire Equity Fund, L.P. (LEF) and Lincolnshire Equity Fund II, L.P. (LEF II). In 2001, LMI began integrating the operations of two portfolio companies with the goal of ultimately marketing them for a joint sale. One of the companies, Peripheral Computer Support, Inc. (PCS) was owned by LEF, while the other, Computer Technology Solutions Corp. (CTS) was owned by LEF II. LMI regularly updated LEF’s and LEF II’s limited partners on the integration process and plans for a combined sale of PCS and CTS. A joint-management team was put in place for PCS and CTS, and the two companies developed a policy for allocating their shared expenses based on the proportion of each company’s revenues to the combined revenues of PCS and CTS. The expense-allocation policy was not always followed, however, which meant that one company sometimes paid more than its share of expenses that benefited both companies, to the detriment of the fund that owned the overpaying company. In 2013, PCS and CTS were sold together to a single acquirer. The SEC subsequently brought an administrative proceeding against LMI for violations of §§ 206(2) and 206(4) of the Investment Advisers Act of 1940 (Advisers Act).