In re JH PARTNERS

 
 
 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
INVESTMENT ADVISERS ACT OF 1940 
Release No. 4276 / November 23, 2015 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-16968 
 
 
In the Matter of 
 
JH PARTNERS, LLC,  
 
Respondent. 
 
 
 
 
ORDER INSTITUTING 
ADMINISTRATIVE AND CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO 
SECTIONS 203(e) AND 203(k) OF THE 
INVESTMENT ADVISERS ACT OF 1940, 
MAKING FINDINGS, AND IMPOSING 
REMEDIAL SANCTIONS AND A CEASE-
AND-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 Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 
(“Advisers Act”) against JH Partners, LLC (“Respondent” or “JHP”). 
 
II. 
 
In  anticipation  of  the  institution  of  these  proceedings,  JHP  has  submitted  an  Offer  of 
Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 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  it  and  the  subject matter  of  these  proceedings,  which  are 
admitted, JHP consents to the entry of this Order Instituting Administrative and Cease-and-Desist 
Proceedings,  Pursuant  to  Sections  203(e)  and  203(k)  of  the  Investment  Advisers  Act  of  1940, 
Making  Findings,  and  Imposing  Remedial  Sanctions  and  a  Cease-and-Desist Order (“Order”),  as 
set forth below. 
 

 2 
III. 
 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that  
 
Summary 
These proceedings arise from negligent breaches of fiduciary duty by JHP, an investment 
adviser to several private equity funds (the “Funds”).  From at least 2006 to 2012, JHP and certain 
of its principals loaned approximately $62 million to the Funds’ portfolio companies to provide 
interim financing for working capital or other urgent cash needs.  By doing so, JHP and its 
principals in certain cases obtained interests in portfolio companies that were senior to the equity 
interests held by the Funds.  JHP also caused more than one Fund to invest in the same portfolio 
company at differing priority levels and/or valuations, potentially favoring one Fund client over 
another.  JHP did not adequately disclose to the advisory boards of the affected Funds the potential 
conflicts of interest created by the undisclosed loans and cross-over investments.  Finally, JHP 
failed to adequately disclose to, or obtain written consent from, its client Funds’ advisory boards 
when certain of their investments exceeded concentration limits in the Funds’ organizational 
documents.  Accordingly, JHP violated Sections 206(2) and 206(4) of the Advisers Act and Rule 
206(4)-8 thereunder. 
 
Respondent 
 
 1. JH Partners, LLC (“JHP”) is a Delaware limited liability company based in San 
Francisco, CA and has been registered with the Commission as an investment adviser since March 
2012.  JHP provides investment advice to three private equity funds, JH Investment Partners, L.P., 
JH Investment Partners II, L.P., and JH Evergreen Fund, L.P.  As of March 31, 2015, JHP’s total 
assets under management were $465.4 million.    
 
Other Relevant Entities 
 
2. JH Investment Partners, L.P. (“Fund I”), JH Investment Partners II, L.P. 
(“Fund II”), and JH Evergreen Fund, L.P. (“Fund III” or “Evergreen Fund”) (collectively, the 
“Funds”) are Delaware limited partnerships formed in 2004, 2006, and 2008, respectively, with 
JHP as their investment adviser.  The Funds’ limited partners consisted of university endowments, 
other institutions, and high-net-worth individuals.  The Funds primarily invested in lower to 
middle-market luxury consumer goods brands.  A Delaware limited liability company that is under 
common control of JHP was named as each Fund’s general partner in the Funds’ organizational 
documents. 
   
 
 
                                                 
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 
Background 
 
3. Formed in 2004, JHP advises and sources potential investments for its Funds that 
invest in lower and middle-market consumer products companies.   
 
4. JHP’s Funds pursue investment strategies that are focused on investing in buyouts, 
spinouts, recapitalizations and other opportunities in the U.S. and abroad.  The Funds were given 
broad authority to carry out their investment activity and could acquire or trade securities of every 
kind, including stocks, notes, bonds, debentures, and other evidences of indebtedness. 
 
5. The limited partners in JHP’s private equity funds include university endowments 
and other large institutional investors and high-net-worth individuals.  The limited partners commit 
and subsequently contribute a specified amount of capital to the Funds for their use to make 
qualifying investments during the investment period.   
 
6. JHP charges its Funds a management fee, which was 2.5% of committed capital 
during the Funds’ investment period.  JHP’s affiliated general partners also receive a carried 
interest of up to 20-25% of the net profits realized by the limited partners in the Funds.  
 
7. An advisory board, consisting of the representatives from the endowment limited 
partners, was formed for each Fund to consult on new investments, resolve potential conflicts of 
interest, approve valuations, and provide oversight over JHP. 
 
8. The Funds’ Limited Partnership Agreements (“LPAs”) require consent of the 
advisory board for any investments in portfolio companies by the general partner or its principals.  
According to the LPAs, consent of the advisory board is also required when the general partner, its 
principals, or their affiliates transfer securities or assets to the Funds. 
 
Undisclosed Direct Loans to the Portfolio Companies 
 
 9. From 2006 to 2012, JHP and certain of its principals provided nearly $62 million in 
direct loans to the Funds’ portfolio companies.  By making these loans, JHP and its principals in 
certain cases obtained interests in portfolio companies that were senior to the equity interests held 
by the Funds.  With few exceptions, JHP did not disclose to the Funds’ advisory boards the 
existence of the direct loans or the potential conflicts of interest they created, nor did JHP obtain 
consent from the advisory boards. 
 
10. For example, in one series of loans, JHP required a portfolio company to execute 
security agreements that pledged the assets of the company to JHP as collateral.  The loans, which 
totaled $2.9 million over a two-year period, funded the company’s litigation against the founder 
and former CEO for allegedly violating his non-compete agreement.   
 
Undisclosed Cross-Over Investments 
 
11. From 2007 to 2012, JHP also failed to adequately disclose that it caused more than 

 4 
one fund to invest in the same portfolio company at differing seniority or priority levels and/or 
valuations, potentially favoring one Fund client over another.   
 
12. For example, Fund II and the Evergreen Fund both invested in the equity of one 
portfolio company but the Evergreen Fund’s equity interests were senior to those of Fund II and 
had a liquidation preference.  In addition, the Evergreen Fund extended tens of millions of dollars 
in loans to the same portfolio company, further elevating the seniority of that Fund’s security 
interests over the interests held by Fund II.  JHP did not adequately disclose to, or seek consent 
from, Fund II’s advisory board that the Evergreen Fund would be investing in the same portfolio 
company.   
 
Undisclosed Overconcentration in Certain Portfolio Companies 
13. The Funds’ LPAs provide that investments in any single company may not exceed 
20% of each fund’s committed capital without advisory board consent and that “in no event” may a 
single company investment exceed 30%.  The LPAs also limit aggregate investments in foreign 
companies to 30% of Funds I and II and 50% of the Evergreen Fund.  The LPAs further require 
that consents be documented by way of a written instrument with signatures from each advisory 
board member.   
14. JHP, however, repeatedly exceeded the concentration limits without adequate 
disclosure or obtaining written consent.  In one instance, Fund II invested over 30% of the 
committed capital in a foreign company, simultaneously violating two concentration limits, one for 
single company investments and another for foreign investments.  Under the LPAs, exceeding the 
30% limit for a single company investment could not be cured by advisory board consent but 
instead required a waiver by all limited partners.  JHP did not seek the required waiver.   
 
15.  In addition, JHP caused the Funds to make a significant number of loans to the 
same portfolio companies that had already exceeded the concentration limits, without appropriate 
disclosure.  Even though the loans increased the Funds’ exposure to already overly-concentrated 
positions, JHP did not advise the advisory boards of this fact. 
 
SEC Compliance Examination 
 
16. In January 2013, following an SEC examination, JHP disclosed the transactions 
described above to the advisory boards of the affected Funds.  In March 2013, JHP agreed to 
subordinate (or place in equal footing) the direct loans to the Funds’ investment interests.  It also 
agreed to forego any rights to pursue repayment under the security agreements on certain loans, 
and has waived to date $24 million in management fees and carried interest.  As part of the March 
2013 agreement, the advisory boards of the affected Funds consented in writing to the direct loans, 
cross-over investments and investments exceeding both single company and international 
concentration limits. 
 
 
 
 

 5 
Violations 
 
17. Section 206(2) of the Advisers Act prohibits investment advisers from directly or 
indirectly engaging “in any transaction, practice, or course of business which operates as a fraud or 
deceit upon any client or prospective client.”  A violation of Section 206(2) of the Advisers Act 
may rest on a finding of simple 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, 195 (1963)).  Proof of 
scienter is not required to establish a violation of Section 206(2) of the Advisers Act.  Id.  As a 
result of the conduct described above, JHP willfully violated Section 206(2) of the Advisers Act.
2
 
 
18. Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder make it unlawful 
for any investment adviser to a pooled investment vehicle to “[m]ake any untrue statement of a 
material fact or omit to state a material fact necessary to make the statements made, in the light of 
the circumstances under which they were made, not misleading, to any investor or prospective 
investor in the pooled investment vehicle” or “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.”  As a result of the conduct described above, JHP willfully violated 
Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder. 
 
JHP’s Remedial Efforts 
In determining to accept the Offer, the Commission considered remedial acts promptly 
undertaken by JHP and cooperation afforded the Commission staff. 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate, in the public interest, to 
impose the sanctions agreed to in Respondent JHP’s Offer. 
 
 Accordingly, pursuant to Sections 203(e) and 203(k) of the Advisers Act, it is hereby 
ORDERED that: 
 
 A. Respondent JHP cease and desist from committing or causing any violations and any 
future violations of Sections 206(2) and 206(4) of the Advisers Act and Rule 206(4)-8 promulgated 
thereunder.   
 
B. Respondent JHP is censured.  
                                                 
2
 A willful violation of the securities laws means merely “that the person charged with the duty 
knows what he is doing.  It does not mean that, in addition, he must suppose that he is breaking 
the law.”  Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 
F.2d 969, 977 (D.C. Cir. 1949)).  Instead, “it has been uniformly held that ‘willfully’ [in the 
securities law context] means intentionally committing the act which constitutes the violation,” 
and there is no requirement that the actor “also be aware that he is violating one of the Rules or 
Acts.”  Id. (quoting Gearhart & Otis, Inc. v. SEC, 348 F.2d 798, 803 (D.C. Cir. 1965)). 

 6 
 
 
C. Respondent shall, within 15 days of the entry of this Order, pay a civil money 
penalty in the amount of $225,000 to the Securities and Exchange Commission for transfer to the 
general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If timely 
payment is not made, additional interest shall accrue pursuant to 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 JH Partners, 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 Marshall Sprung, Co-Chief Asset Management Unit, Division of 
Enforcement, Los Angeles Regional Office, Securities and Exchange Commission, 
444 South Flower Street, Suite 900, Los Angeles, CA 90071.   
 
 D. 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 
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 

 7 
on substantially the same facts as alleged in the Order instituted by the Commission in this 
proceeding. 
 
 By the Commission. 
 
 
       Brent J. Fields 
       Secretary 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

INVESTMENT ADVISERS ACT OF 1940 

Release No. 4276 / November 23, 2015 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-16968 

 

 

In the Matter of 

 

JH PARTNERS, LLC,  

 

Respondent. 

 

 

 

 

ORDER INSTITUTING 

ADMINISTRATIVE AND CEASE-AND-

DESIST PROCEEDINGS PURSUANT TO 

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

INVESTMENT ADVISERS ACT OF 1940, 

MAKING FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS AND A CEASE-

AND-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 Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 

(“Advisers Act”) against JH Partners, LLC (“Respondent” or “JHP”). 

 

II. 

 

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

Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 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 it and the subject matter of these proceedings, which are 

admitted, JHP consents to the entry of this Order Instituting Administrative and Cease-and-Desist 

Proceedings, Pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940, 

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

set forth below. 

 



 2 

III. 

 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that  

 

Summary 

These proceedings arise from negligent breaches of fiduciary duty by JHP, an investment 

adviser to several private equity funds (the “Funds”).  From at least 2006 to 2012, JHP and certain 

of its principals loaned approximately $62 million to the Funds’ portfolio companies to provide 

interim financing for working capital or other urgent cash needs.  By doing so, JHP and its 

principals in certain cases obtained interests in portfolio companies that were senior to the equity 

interests held by the Funds.  JHP also caused more than one Fund to invest in the same portfolio 

company at differing priority levels and/or valuations, potentially favoring one Fund client over 

another.  JHP did not adequately disclose to the advisory boards of the affected Funds the potential 

conflicts of interest created by the undisclosed loans and cross-over investments.  Finally, JHP 

failed to adequately disclose to, or obtain written consent from, its client Funds’ advisory boards 

when certain of their investments exceeded concentration limits in the Funds’ organizational 

documents.  Accordingly, JHP violated Sections 206(2) and 206(4) of the Advisers Act and Rule 

206(4)-8 thereunder. 

 

Respondent 

 

 1. JH Partners, LLC (“JHP”) is a Delaware limited liability company based in San 

Francisco, CA and has been registered with the Commission as an investment adviser since March 

2012.  JHP provides investment advice to three private equity funds, JH Investment Partners, L.P., 

JH Investment Partners II, L.P., and JH Evergreen Fund, L.P.  As of March 31, 2015, JHP’s total 

assets under management were $465.4 million.    

 

Other Relevant Entities 

 

2. JH Investment Partners, L.P. (“Fund I”), JH Investment Partners II, L.P. 
(“Fund II”), and JH Evergreen Fund, L.P. (“Fund III” or “Evergreen Fund”) (collectively, the 
“Funds”) are Delaware limited partnerships formed in 2004, 2006, and 2008, respectively, with 
JHP as their investment adviser.  The Funds’ limited partners consisted of university endowments, 
other institutions, and high-net-worth individuals.  The Funds primarily invested in lower to 
middle-market luxury consumer goods brands.  A Delaware limited liability company that is under 
common control of JHP was named as each Fund’s general partner in the Funds’ organizational 
documents. 

   
 
 

                                                 
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 

Background 

 

3. Formed in 2004, JHP advises and sources potential investments for its Funds that 

invest in lower and middle-market consumer products companies.   

 

4. JHP’s Funds pursue investment strategies that are focused on investing in buyouts, 

spinouts, recapitalizations and other opportunities in the U.S. and abroad.  The Funds were given 

broad authority to carry out their investment activity and could acquire or trade securities of every 

kind, including stocks, notes, bonds, debentures, and other evidences of indebtedness. 

 

5. The limited partners in JHP’s private equity funds include university endowments 

and other large institutional investors and high-net-worth individuals.  The limited partners commit 

and subsequently contribute a specified amount of capital to the Funds for their use to make 

qualifying investments during the investment period.   

 

6. JHP charges its Funds a management fee, which was 2.5% of committed capital 

during the Funds’ investment period.  JHP’s affiliated general partners also receive a carried 

interest of up to 20-25% of the net profits realized by the limited partners in the Funds.  

 

7. An advisory board, consisting of the representatives from the endowment limited 

partners, was formed for each Fund to consult on new investments, resolve potential conflicts of 

interest, approve valuations, and provide oversight over JHP. 

 

8. The Funds’ Limited Partnership Agreements (“LPAs”) require consent of the 

advisory board for any investments in portfolio companies by the general partner or its principals.  

According to the LPAs, consent of the advisory board is also required when the general partner, its 

principals, or their affiliates transfer securities or assets to the Funds. 

 

Undisclosed Direct Loans to the Portfolio Companies 

 

 9. From 2006 to 2012, JHP and certain of its principals provided nearly $62 million in 

direct loans to the Funds’ portfolio companies.  By making these loans, JHP and its principals in 

certain cases obtained interests in portfolio companies that were senior to the equity interests held 

by the Funds.  With few exceptions, JHP did not disclose to the Funds’ advisory boards the 

existence of the direct loans or the potential conflicts of interest they created, nor did JHP obtain 

consent from the advisory boards. 

 

10. For example, in one series of loans, JHP required a portfolio company to execute 

security agreements that pledged the assets of the company to JHP as collateral.  The loans, which 

totaled $2.9 million over a two-year period, funded the company’s litigation against the founder 

and former CEO for allegedly violating his non-compete agreement.   

 

Undisclosed Cross-Over Investments 

 

11. From 2007 to 2012, JHP also failed to adequately disclose that it caused more than 



 4 

one fund to invest in the same portfolio company at differing seniority or priority levels and/or 

valuations, potentially favoring one Fund client over another.   

 

12. For example, Fund II and the Evergreen Fund both invested in the equity of one 

portfolio company but the Evergreen Fund’s equity interests were senior to those of Fund II and 

had a liquidation preference.  In addition, the Evergreen Fund extended tens of millions of dollars 

in loans to the same portfolio company, further elevating the seniority of that Fund’s security 

interests over the interests held by Fund II.  JHP did not adequately disclose to, or seek consent 

from, Fund II’s advisory board that the Evergreen Fund would be investing in the same portfolio 

company.   

 

Undisclosed Overconcentration in Certain Portfolio Companies 

13. The Funds’ LPAs provide that investments in any single company may not exceed 

20% of each fund’s committed capital without advisory board consent and that “in no event” may a 

single company investment exceed 30%.  The LPAs also limit aggregate investments in foreign 

companies to 30% of Funds I and II and 50% of the Evergreen Fund.  The LPAs further require 

that consents be documented by way of a written instrument with signatures from each advisory 

board member.   

14. JHP, however, repeatedly exceeded the concentration limits without adequate 

disclosure or obtaining written consent.  In one instance, Fund II invested over 30% of the 

committed capital in a foreign company, simultaneously violating two concentration limits, one for 

single company investments and another for foreign investments.  Under the LPAs, exceeding the 

30% limit for a single company investment could not be cured by advisory board consent but 

instead required a waiver by all limited partners.  JHP did not seek the required waiver.   

 

15.  In addition, JHP caused the Funds to make a significant number of loans to the 

same portfolio companies that had already exceeded the concentration limits, without appropriate 

disclosure.  Even though the loans increased the Funds’ exposure to already overly-concentrated 

positions, JHP did not advise the advisory boards of this fact. 

 

SEC Compliance Examination 

 

16. In January 2013, following an SEC examination, JHP disclosed the transactions 

described above to the advisory boards of the affected Funds.  In March 2013, JHP agreed to 

subordinate (or place in equal footing) the direct loans to the Funds’ investment interests.  It also 

agreed to forego any rights to pursue repayment under the security agreements on certain loans, 

and has waived to date $24 million in management fees and carried interest.  As part of the March 

2013 agreement, the advisory boards of the affected Funds consented in writing to the direct loans, 

cross-over investments and investments exceeding both single company and international 

concentration limits. 

 

 

 

 



 5 

Violations 

 

17. Section 206(2) of the Advisers Act prohibits investment advisers from directly or 

indirectly engaging “in any transaction, practice, or course of business which operates as a fraud or 

deceit upon any client or prospective client.”  A violation of Section 206(2) of the Advisers Act 

may rest on a finding of simple 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, 195 (1963)).  Proof of 

scienter is not required to establish a violation of Section 206(2) of the Advisers Act.  Id.  As a 

result of the conduct described above, JHP willfully violated Section 206(2) of the Advisers Act.
2
 

 

18. Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder make it unlawful 

for any investment adviser to a pooled investment vehicle to “[m]ake any untrue statement of a 

material fact or omit to state a material fact necessary to make the statements made, in the light of 

the circumstances under which they were made, not misleading, to any investor or prospective 

investor in the pooled investment vehicle” or “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.”  As a result of the conduct described above, JHP willfully violated 

Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder. 

 

JHP’s Remedial Efforts 

In determining to accept the Offer, the Commission considered remedial acts promptly 

undertaken by JHP and cooperation afforded the Commission staff. 

IV. 

 

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

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

 

 Accordingly, pursuant to Sections 203(e) and 203(k) of the Advisers Act, it is hereby 

ORDERED that: 

 

 A. Respondent JHP cease and desist from committing or causing any violations and any 

future violations of Sections 206(2) and 206(4) of the Advisers Act and Rule 206(4)-8 promulgated 

thereunder.   

 

B. Respondent JHP is censured.  

                                                 
2
 A willful violation of the securities laws means merely “that the person charged with the duty 

knows what he is doing.  It does not mean that, in addition, he must suppose that he is breaking 

the law.”  Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 

F.2d 969, 977 (D.C. Cir. 1949)).  Instead, “it has been uniformly held that ‘willfully’ [in the 

securities law context] means intentionally committing the act which constitutes the violation,” 

and there is no requirement that the actor “also be aware that he is violating one of the Rules or 

Acts.”  Id. (quoting Gearhart & Otis, Inc. v. SEC, 348 F.2d 798, 803 (D.C. Cir. 1965)). 



 6 

 

 

C. Respondent shall, within 15 days of the entry of this Order, pay a civil money 

penalty in the amount of $225,000 to the Securities and Exchange Commission for transfer to the 

general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If timely 

payment is not made, additional interest shall accrue pursuant to 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 JH Partners, 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 Marshall Sprung, Co-Chief Asset Management Unit, Division of 

Enforcement, Los Angeles Regional Office, Securities and Exchange Commission, 

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

 

 D. 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 

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 



 7 

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

proceeding. 

 

 By the Commission. 

 

 

       Brent J. Fields 

       Secretary