The SEC settled charges against a private fund manager, its former managing partner, and former Chief Operating Officer (COO) for breach of fiduciary duties when they misused fund and portfolio company assets for their own personal benefit. The misuse resulted from the COO's active participation in the day-to-day operations of portfolio companies with direct access to portfolio company bank accounts and debit cards, which enabled her to misuse portfolio company assets and conceal such activities from the firm and the managing partner for some period of time. The managing partner also served as the firm’s Chief Compliance Officer (CCO) and was faulted for both compliance and supervisory failures. The SEC further charged the adviser with custody rule violations. When a firm’s managing partner or investment partner serves in a compliance capacity, or simply places too much trust in other partners and fails to adequately oversee their activities, misuse of assets may occur and go undetected for extended periods. When the protections afforded by a fund audit under the Custody Rule are not available, this risk is exacerbated.