UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES ACT OF 1933

Release No. 10581 / December 3, 2018

SECURITIES EXCHANGE ACT OF 1934

Release No. 84713 / December 3, 2018

INVESTMENT ADVISERS ACT OF 1940

Release No. 5070 / December 3, 2018

INVESTMENT COMPANY ACT OF 1940

Release No. 33312 / December 3, 2018

ADMINISTRATIVE PROCEEDING

File No. 3-18909

In the Matter of

FIFTH STREET 

MANAGEMENT, LLC 

Respondent.

ORDER INSTITUTING 

ADMINISTRATIVE AND CEASE-ANDDESIST PROCEEDINGS, PURSUANT TO 

SECTION 8A OF THE SECURITIES ACT 

OF 1933, SECTION 21C OF THE 

SECURITIES EXCHANGE ACT OF 1934, 

SECTIONS 203(e) AND 203(k) OF THE 

INVESTMENT ADVISERS ACT OF 1940 

AND SECTION 9(f) OF THE 

INVESTMENT COMPANY ACT OF 1940 

MAKING FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS AND A CEASEAND-DESIST ORDER 

I.

The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 

public interest that public administrative and cease-and-desist proceedings be, and hereby are, 

instituted pursuant to Section 8A of the Securities Act of 1933 (“Securities Act”), Section 21C of 

the Securities Exchange Act of 1934 (“Exchange Act”), Sections 203(e) and 203(k) of the 

Investment Advisers Act of 1940 (“Advisers Act”), and Section 9(f) of the Investment Company 

Act of 1940 (“Investment Company Act”) against Fifth Street Management, LLC (“FSM” or 

“Respondent”). 

II.

In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the 
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purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings

herein, except as to the Commission’s jurisdiction over him and the subject matter of these 

proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 

Administrative and Cease-and-Desist Proceedings, Pursuant to Section 8A of the Securities Act of 

1933, Section 21C of the Securities Exchange Act of 1934, Sections 203(e) and 203(k) of the 

Investment Advisers Act of 1940 and Section 9(f) of the Investment Company Act of 1940, 

Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order (“Order”), as 

set forth below. 

III.

On the basis of this Order and Respondent’s Offer, the Commission finds1that:

Summary

1. This matter arises from FSM’s improper allocation of expenses to its former 

business development company (“BDC”) clients, and failures relating to the valuation of two 

portfolio company investments held by one of the BDCs (“BDC-1”). In 2013 and 2014, FSM 

improperly allocated to the BDC clients $1,208,510 in rent and other overhead expenses that the 

adviser should have paid. Further, during 2014, FSM also improperly allocated $118,895 in 

compensation expenses of two FSM employees to the BDC clients. 

2. In addition, FSM was responsible for conducting the quality control review of its 

BDC clients’ quarterly valuation models (“QC Review”) for illiquid assets whose values could not 

be determined by reference to market prices or quotes. FSM failed to conduct this work in a 

reasonable manner resulting in BDC-1 overvaluing two portfolio companies, causing its financial 

statements that were included in its Forms 10-Q for periods ended March 31 and June 30, 2014, and

Form 10-K for period end September 30, 2014, to materially misstate net increase in assets resulting 

from operations (“Net Income”) and earnings per share (“EPS”). In July 2014 and September 2014, 

BDC-1 offered and sold additional shares of its stock while these inflated Net Income and EPS 

figures were outstanding. When these and other valuations were changed to reasonably reflect the

portfolio companies’ forecasted performance, BDC-1’s stock price dropped 15% on February 9, 

2015, when it filed its Form 10-Q for quarter-end December 31, 2014. FSM did not implement 

written policies and procedures reasonably designed to prevent violations of the Advisers Act 

concerning expense allocation until July 2016, did not implement them for the QC Reviews, and did 

not have adequate policies and procedures concerning the prevention of the use of material, 

nonpublic information. 

3. As a result of the aforementioned conduct, FSM willfully violated Sections 204A, 

206(2), 206(4), and 207 of the Advisers Act and Rules 206(4)-7(a) and 206(4)-8(a)(2), thereunder, 

 

1 The findings herein are made pursuant to Respondent's Offer of Settlement and are not 

binding on any other person or entity in this or any other proceeding. 
3

and caused BDC-1’s violations of Section 17(a)(2) of the Securities Act and Sections 13(a), 

13(b)(2)(A), 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13, and Section 

31(a) of the Investment Company Act and Rule 31a-1 thereunder, and BDC-2’s violations of 

Exchange Act Sections 13(b)(2)(A) and 13(b)(2)(B) and Section 31(a) of the Investment Company 

Act and Rule 31a-1, thereunder.

Respondent

4. Fifth Street Management, LLC (“FSM”) is a Delaware limited liability company 

with its principal office in Greenwich, Connecticut. It was registered with the Commission as an 

investment adviser from December 2007 until November 2017 when it withdrew its registration. 

FSM provided investment advisory services to other Fifth Street affiliated companies including 

BDC-1, BDC-2 (collectively the “BDC clients”), two Collateralized Loan Obligation (“CLO”)

funds, and a private hedge fund. As of March 31, 2014, FSM had $2.633 billion under 

management. 

FACTS

A. FSM’s Business Development Company Clients

5. FSM was the investment adviser to two non-diversified, closed-end companies that 

elected to be treated as BDCs under the Investment Company Act. BDC-1 conducted its initial 

public offering in 2008 and, according to its Form 10-K as of September 30, 2014, its portfolio 

totaled $2.5 billion at fair value. BDC-2 conducted an initial public offering in July 2013 and, 

according to its Form 10-K as of September 30, 2014, its portfolio totaled $300 million at fair value. 

At all relevant times, the BDCs’ common stock was registered pursuant to Section 12(b) of the 

Exchange Act and the BDCs were required to file periodic reports with the Commission pursuant to 

Section 13 of the Exchange Act. FSM stopped being the BDC clients’ adviser in October 2017. 

FSM charged BDC-1 and BDC-2 quarterly fees based on assets under management and the 

performance of the funds. 

B. FSM’s Misallocation of Rent and Other Overhead Expenses and Employee 

Compensation 

6. The BDC clients entered into Investment Advisory Agreements (“Advisory 

Agreements”) with FSM. According to these agreements, FSM was responsible for paying “the 

compensation and routine overhead expenses” of its personnel. Although FSM allocated shared 

expenses to its clients, it did not adopt and implement written expense allocation policies and 

procedures until July 2016. 

7. FSM and the BDC clients used the same office space and numerous employees 

performed work for both FSM and the BDC clients. From quarter-end June 30, 2013 through yearend September 30, 2014, FSM had between 52 and 75 employees. While FSM allocated

compensation expenses for only eight or nine employees to the BDC clients, it allocated essentially 

all the rent and other overhead expenses associated with its employees to the BDC clients. This 

over allocation of rent and other overhead expenses to FSM’s BDC clients was $1,208,510.
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8. In addition, from April 2014 until November 2014, FSM improperly allocated

$118,895 to the BDC clients for the compensation of two FSM employees who assisted in 

preparing the Form S-1 for an FSM affiliate’s 2014 initial public offering. That initial public 

offering was unrelated to FSM’s advisory work for the BDC clients.

9. FSM’s misallocation of rent and other overhead and employee compensation 

expenses to its BDC clients caused the BDCs’ books and records to be inaccurate for the periods 

during which the misallocations occurred because their expenses were overstated. 

10. These expense allocations were also contrary to FSM’s Forms ADV. In 2014, 

Item 5.E of Part 1 of Form ADV required that an investment adviser identify or describe the 

ways it is compensated for providing advisory services. FSM’s Form ADV filed on March 31 

and August 15, 2014 identified that it received a percentage of assets under management and 

performance-based fees, but did not disclose that, in addition to such amounts, its BDC clients

were paying FSM’s rent, other overhead expenses, and a portion of the compensation of two 

employees, which constituted “other” compensation under Item 5.E.

C. FSM’s Role in BDC-1’s Portfolio Company Quarterly Valuation Process

11. BDC-1 loaned funds to, and invested in, small and mid-sized companies. Its 

portfolio was composed of mostly first and second liens and subordinated debt investments that 

were valued using Level 3 inputs under Financial Accounting Standards Board Accounting 

Standards Codification Topic 820, Fair Value Measurements and Disclosures. 

 

12. In its public filings, BDC-1 described a board-approved methodology and nine-step 

process that it used to value its portfolio on a quarterly basis, with BDC-1’s board ultimately 

determining in good faith the fair value of the portfolio. FSM’s portfolio company analysts 

(“Analysts”) were integrally involved in BDC-1’s valuation process and FSM conducted the QC 

Review of BDC-1’s quarterly valuation models that used Level 3 inputs for its debt investments. 

13. FSM’s Analysts were responsible for uploading to FSM’s shared network drive each

portfolio companies’ most recently available financial reporting packages, budget projections, 

lender updates, and board presentations. All of BDC-1’s non-advisory functions and corporate

officers were outsourced to an FSM affiliate that was not an investment adviser. The affiliate’s 

employees who performed the non-advisory functions are hereafter referred to as “BDC-1 

personnel.” BDC-1’s quarterly valuation process began with BDC-1’s personnel preparing the 

valuation models using objective and subjective inputs gathered from the portfolio company 

information uploaded to the shared drive.

14. FSM’s QC Review of the inputs to the valuation models was a critical part of 

BDC-1’s quarterly valuation process and its internal accounting controls. Unlike BDC-1’s

personnel, FSM’s Analysts worked closely with the portfolio companies and were thus very 

familiar with the portfolio companies’ financial performance and outlook and, thus, were better 

suited to assess the reasonableness of the valuation model inputs. 
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15. BDC-1 provided FSM’s Analysts with a checklist to confirm the use of the most 

recent company specific information and the reasonableness of subjective inputs as part of the QC 

Review process. Some FSM employees, including the two analysts discussed herein, however, did 

not understand the level of review required, and failed to flag incorrect or unreasonable valuation 

model inputs for at least two of BDC-1’s portfolio company investments that resulted in materially 

inaccurate financial statements of BDC-1 that were included in its Forms 10-Q for the periods 

ended March 31 and June 30, 2014, and Form 10-K for period ended September 30, 2014. FSM 

failed to adopt and implement written policies and procedures concerning the QC Review process, 

and failed to train its Analysts who conducted the QC Reviews. 

QC Review of Portfolio Company A for Periods Ended March 31, June 30, and September 30, 2014

16. In March 2013, BDC-1 restructured a loan to Portfolio Company A, resulting in 

BDC-1 becoming the controlling equity owner of the company. FSM’s head of portfolio 

management, and the junior analyst covering Portfolio Company A (“Company A Analyst”) 

became company board members. Thus, they were familiar with the operational and financial 

performance of Portfolio Company A and its future prospects. 

17. After Portfolio Company A’s restructuring and into 2014, the company’s financial 

performance significantly deteriorated. In February 2014, Portfolio Company A revised its budget 

and reduced its 2014 projected net revenue. However, Company A Analyst did not upload that 

budget to the shared drive, and BDC-1 personnel did not incorporate the updated projections into 

Portfolio Company A’s valuation model for the quarter-ended March 31, 2014. As a result, BDC1’s valuation model did not reasonably reflect Portfolio Company A’s deteriorating condition and 

outlook.

18. Company A Analyst conducted the QC review of the valuation model for Portfolio 

Company A for March 31, 2014, and failed to identify that financial projections used as valuation 

model inputs were based on stale data from August 2013. Company A Analyst also failed to note 

that year-over-year sales growth estimates were unreasonable, particularly given the fact that 

Portfolio Company A had recently lost a major customer. Although the analyst noted on the QC 

review checklist that the 2014 net revenue projection used in the valuation model was incorrect and 

listed the correct number, the analyst failed to make the correction in the electronic version of the 

model, and the preliminary valuation presented to and approved by BDC-1’s audit committee and 

board did not incorporate the updated projection.

19. During the quarter-ended June 30, 2014, Portfolio Company A’s performance 

continued to decline and BDC-1 injected additional equity into the company and that equity 

investment was written down at quarter end. Portfolio Company A management also revised 

downward its 2014 financial projections. 

20. Company A Analyst also conducted the QC Reviews for the June 30 and September 

30, 2014, Portfolio Company A valuation models. The analyst again failed to identity that financial 

projections used as valuation model inputs were based on stale data from August 2013 or note that 

the year-over-year sales growth estimates were unreasonable in light of Portfolio Company A’s 

continued deteriorating performance and outlook. 
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21. As a result of the failures in the QC review process for the March 31, June 30, and 

September 30, 2014, Portfolio Company A valuation models, the valuations presented to and 

approved by BDC-1’s audit committee and board were overvalued by about $3 million for each 

quarter. These incorrect valuations were ultimately incorporated into BDC-1’s financial statements

that were included in Forms 10-Q for the periods ended March 31 and June 30, 2014, and Form 10-

K for the period ended September 30, 2014.

QC Review of Portfolio Company B for Periods Ended June 30 and September 30, 2014 

 

22. As of quarter-end June 30, 2014, BDC-1 had maintained its loan position in 

Portfolio Company B for a number of years. In 2013, Portfolio Company B experienced significant 

issues with legacy contracts, deteriorating financial performance, and problems with its internal 

accounting. Those problems continued in 2014 and in May of that year FSM’s team covering 

Portfolio Company B requested an operational and financial performance update from the company.

23. On June 10, 2014, Portfolio Company B presented a written lender update to FSM’s 

head of portfolio management and the junior analyst covering Portfolio Company B (“Company B 

Analyst”), showing that Portfolio Company B’s management expected 2014 adjusted earnings 

before interest, taxes, depreciation and amortization (“EBITDA”) to decline from about $10 million 

to just under $3 million. 

24. Company B Analyst failed to upload the June 10, 2014, lender update to FSM’s

shared drive and BDC-1 personnel were therefore unaware of Portfolio Company B’s significantly 

lower revision of its projected 2014 EBITDA when preparing Portfolio Company B’s valuation 

model for the quarter ended June 30, 2014.

25. On July 10, 2014, Company B Analyst conducted the QC review of BDC-1’s 

valuation model for the company. However, the analyst failed to identify the reduction of Portfolio 

Company B’s expected 2014 EBITDA to approximately $3 million, instead of the $10 million used 

in the valuation model. 

26. At the July 21, 2014, BDC-1 audit committee meeting where the June 30, 2014,

preliminary quarterly valuations were reviewed and discussed, FSM failed to identify that Portfolio 

Company B expected a significant decline in expected 2014 EBITDA. The failure to incorporate 

the $3 million expected EBITDA assumption into the valuation model resulted in Portfolio 

Company B being overvalued in the range of $7.2 million to $19 million, depending on whether 

other model assumptions were adjusted. BDC-1’s audit committee and board reviewed and 

approved the preliminary Portfolio Company B valuation that did not account for the reduction in 

projected EBITDA. 

27. Portfolio Company B provided FSM with another lender update on September 22, 

2014, which showed that company management expected 2014 adjusted EBITDA to be negative 

$3.7 million. Company B Analyst also performed the QC review for the preliminary Portfolio 

Company B valuation model and again failed to identify that the model was using the stale $10 

million EBITDA figure instead of the September revision. These incorrect valuations were
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presented to and approved by BDC-1’s audit committee and board and were ultimately incorporated 

into BDC-1’s financial statements that were included in its Form 10-Q for the period ended June 30, 

2014, and Form 10-K for the period ended September 30, 2014. 

Effect of Portfolio Company A & B Overstated Valuations on BDC-1’s SEC Periodic Filings, 

2014 Stock Offerings, and Books and Records

28. The overstated Portfolio Company A valuation had a material effect on BDC-1’s net 

increase in assets resulting from operations (“Net Income”) and earnings per share (“EPS”) for the 

period ended March 31, 2014, while the overstated Portfolio Company A and B valuations had a 

material effect on BDC-1’s Net Income and EPS for the periods ended June 30 and September 30,

2014. In addition, BDC-1 offered and sold additional shares while the materially misstated 

valuations for periods ended March 31 and June 30, 2014, were outstanding. 

29. In particular, for quarter-end March 31, 2014, BDC-1’s reported Net Income was 

$30.1 million. That figure was overstated by approximately $3 million and BDC-1’s EPS was 

overstated at $0.22 instead of $0.20. On July 15, 2014, BDC-1 conducted a secondary offering of 

13.25 million shares of common stock that raised net proceeds of $129.7 million. This offering was 

overvalued due to the material misstatements in BDC-1’s Form 10-Q for quarter-end March 31, 

2014.

30. Likewise, for quarter-ended June 30, 2014, BDC-1’s Net Income of approximately 

$20.287 million was also materially overstated by at least $10 million and as much as $22 million, 

which would have reduced its EPS from $0.15 to between $0.00 and $0.05. In September 2014, 

BDC-1 conducted an at-the-market offering that raised net proceeds of $8.3 million. This offering 

was also overvalued due to the material misstatements in BDC-1’s Form 10-Q for quarter-end June 

30, 2014.

31. The amount of advisory fees BDC-1 paid to FSM was based on the value of the 

BDC-1’s assets and its performance. Thus, as a result of the overvaluation of Portfolio Company A 

and B for the periods ended March 31, June 30, and September 30, 2014, BDC-1 paid excess 

advisory fees to FSM which further caused BDC-1’s books and records to be inaccurate.

D. Prevention of Misuse of Nonpublic Information 

32. In addition to its BDC clients, FSM was the investment adviser to the Fifth Street 

group’s hedge fund. Some of FSM’s investment professionals simultaneously performed work for 

FSM’s BDC clients and the hedge fund. Thus, FSM learned material, non-public information about 

the BDCs’ portfolio companies. 

33. In addition, FSM’s marketing materials for the hedge fund stated that FSM sought to 

leverage private company information flow generated through the FSM’s work for its other clients. 

That is, FSM, as the adviser for the BDCs, had information about the BDC’s portfolio companies, 

which information FSM could then use to make investment decisions for the hedge fund. Although 

FSM maintained a written insider trading policy, it did not address the situation of using one client’s 

material, nonpublic information for the benefit of another client. Thus, FSM failed to establish, 
8

maintain, and enforce written policies and procedures reasonably designed to prevent the misuse of 

material, non-public information gained from working for one client and using it for the benefit of 

another.

Violations

34. As a result of the conduct described above, FSM willfully violated Section 206(2) 

of the Advisers Act which makes it unlawful for any investment adviser, directly or indirectly to 

“engage in any transaction, practice or course of business which operates as a fraud or deceit upon 

any client or prospective client.” Scienter is not required to establish a violation of Section 206(2), 

but rather may rest upon a finding of negligence. SEC v. Steadman, 967 F.2d 636, 643 n.5 (D.C. 

Cir. 1992)(citing SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 194-195 (1963)). 

35. As a result of the conduct described above, FSM willfully violated Section 206(4) 

of the Advisers Act and Rule 204(4)-8(a)(2) promulgated thereunder, which makes it unlawful for 

any investment adviser to a pooled investment vehicle to “engage in any act, practice, or course of 

business that is fraudulent, deceptive, or manipulative with respect to any investor or prospective 

investor in the pooled investment vehicle.” A violation of Section 206(4) and the rules thereunder 

does not require scienter. Steadman, 967 F.2d at 647. 

36. As a result of the conduct described above, FSM willfully violated Section 206(4) 

of the Advisers Act and Rule 206(4)-7(a) promulgated thereunder, which require investment 

advisers registered or required to be registered with the Commission to adopt and implement 

written policies and procedures reasonably designed to prevent violations of the Advisers Act and 

its rules by the adviser or its supervised persons.

37. As a result of the conduct described above, FSM willfully violated Section 207 of 

the Advisers Act, which makes it “unlawful for any person willfully to make any untrue statement 

of a material fact in any registration application or report filed with the Commission . . . or 

willfully to omit to state in any such application or report any material fact which is required to be 

stated therein.”

38. As a result of the conduct described above, FSM willfully violated Section 204A of 

the Advisers Act, which requires investment advisers subject to Section 204 of the Advisers Act to 

establish, maintain, and enforce written policies and procedures reasonably designed to prevent the 

misuse of material, nonpublic information by the investment adviser or any person associated with 

such investment adviser. 

39. As a result of the conduct described above, FSM caused BDC-1’s violation of 

Section 17(a)(2) of the Securities Act, which prohibits any person from obtaining money or 

property in the offer or sale of securities by means of any untrue statement of a material fact or any 

omission to state a material fact necessary in order to make the statements made, in light of the 

circumstances under which they were made, not misleading.

40. As a result of the conduct described above, FSM caused BDC-1’s violations of 

Exchange Act Section 13(a) and Rules 13a-1, and 13a-13 thereunder, which require that every 
9

issuer of a security registered pursuant to Exchange Act Section 12 file with the Commission, 

among other things, annual and quarterly reports as the Commission may require.

41. As a result of the conduct described above, FSM caused BDC-1’s violation of Rule 

12b-20 under the Exchange Act, which requires that, in addition to the information expressly 

required to be included in a statement or report filed with the Commission, there shall be added 

such further material information, if any, as may be necessary to make the required statements, in 

light of the circumstances under which they are made, not misleading.

42. As a result of the conduct described above, FSM caused BDC-1’s and BDC-2’s 

violations of Section 13(b)(2)(A) of the Exchange Act which require issuers with a security 

registered pursuant to Section 12 to make and keep books, records and accounts which, in 

reasonable detail, accurately and fairly reflect transactions and dispositions of their assets.

43. As a result of the conduct described above, FSM caused BDC-1’s and BDC-2’s 

violations of Section 13(b)(2)(B) of the Exchange Act, which requires issuers with a security 

registered pursuant to Section 12 to devise and maintain a system of internal accounting controls 

sufficient to provide reasonable assurances that transactions are recorded as necessary to, among 

other things, permit preparation of financial statements in accordance with GAAP.

44. As a result of the conduct described above, FSM caused BDC-1’s and BDC-2’s 

violations of Section 31(a) of the Investment Company Act, made applicable to the BDCs by 

Section 64 of the Investment Company Act, and Rule 31a-1 thereunder, which requires registered 

investment companies, among other entities, to maintain and keep current books and records, 

including, among other things, ledgers reflecting all assets, liabilities, reserve, capital, income and 

expense accounts.

IV.

In view of the foregoing, the Commission deems it appropriate, in the public interest 

to impose the sanctions agreed to in Respondent’s Offer.

Accordingly, pursuant to Section 8A of the Securities Act, 21C of the Exchange Act, 

Sections 203(e) and 203(k) of the Advisers Act, and Section 9(f) and of the Investment Company 

Act it is hereby ORDERED that:

A. FSM cease and desist from committing or causing any violations and any future 

violations of Section 17(a)(2) of the Securities Act, Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of 

the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 promulgated thereunder, Sections 206(2), 

206(4), 207, and 204A of the Advisers Act and Rules 206(4)-8 and 206(4)-7 promulgated 

thereunder, and Section 31(a) of the Investment Company Act and Rule 31a-1 promulgated 

thereunder. 

B. FSM is censured. 
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C. FSM shall, within 30 days of the entry of this Order, pay disgorgement of 

$1,999,115.86, prejudgment interest of $334,545.65, and a civil money penalty in the amount of 

$1,650,000.00 to the Securities and Exchange Commission. If timely payment is not made, 

additional interest shall accrue pursuant to SEC Rule of Practice 600 and 31 U.S.C. § 3717. 

Payment must be made in one of the following ways: 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to: 

Enterprise Services Center

Accounts Receivable Branch

HQ Bldg., Room 181, AMZ-341

6500 South MacArthur Boulevard

Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying Fifth 

Street Management, LLC as a Respondent in these proceedings, and the file number of these 

proceedings; a copy of the cover letter and check or money order must be sent to C. Dabney 

O’Riordan, the Associate Director, Division of Enforcement, Securities and Exchange 

Commission, 444 South Flower Street, Suite 900, Los Angeles, CA 90071. 

D. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended, a Fair 

Fund is created for the disgorgement, prejudgment interest AND penalties referenced in paragraph 

C above. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 

treated as penalties paid to the government for all purposes, including all tax purposes. To 

preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 

Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any 

award of compensatory damages by the amount of any part of Respondent’s payment of a civil 

penalty in this action ("Penalty Offset"). If the court in any Related Investor Action grants such a 

Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting 

the Penalty Offset, notify the Commission's counsel in this action and pay the amount of the 

Penalty Offset to the Securities and Exchange Commission. Such a payment shall not be deemed 

an additional civil penalty and shall not be deemed to change the amount of the civil penalty 
11

imposed in this proceeding. For purposes of this paragraph, a "Related Investor Action" means a 

private damages action brought against Respondent by or on behalf of one or more investors based 

on substantially the same facts as alleged in the Order instituted by the Commission in this 

proceeding.

By the Commission.

Brent J. Fields

Secretary