A private equity firm with billions of dollars worth of self-storage properties under management has agreed to pay more than $20M in penalties after the Securities and Exchange Commission said it failed to adequately disclose that the brokerage firm it used to source deals was owned by the investment shop’s CEO.

Saratoga Springs, New York-based Prime Group Holdings LLC has agreed to pay the SEC a $6.5M civil penalty and repay investors $14M in disgorgement and interest charges.

The case stems from Prime Group using a brokerage firm owned by its CEO, Robert Moser, and made up of independent contractors and its own employees to secure off-market self-storage transactions for Prime Group, collecting between 1% and 3% fees as commissions.

The SEC accused Prime Group of making misleading statements in its offering materials for Prime Storage Fund II concerning fees and conflicts of interest while paying its own subsidiary $18M between 2017 and 2021. It told investors it would pay commissions to unaffiliated groups, when in fact Moser's brokerage firm was collecting the fees and used them to fund Prime Group's sourcing operations and to compensate members of the deal teams, according to the SEC.

Prime Group raised a total of $706M for 121 self-storage deals in Fund II, which closed in 2017. Prime Group didn't admit or deny wrongdoing with the settlement, which includes a cease-and-desist order regarding the actions cited by the SEC.

“Information related to payments made to affiliates, and the potential conflicts of interests embedded in such arrangements, is critical to investors’ decisions,” Osman Nawaz, the SEC Enforcement Division’s Complex Financial Instruments Unit chief, said in a statement.

While the SEC didn't name the affiliated broker, Moser holds active broker licenses with RJM Properties and Lake George Homes & Land, both of which are based at 85 Railroad Place, Suite 100, in Saratoga Springs — the same address as Prime Group’s headquarters, according to New York state licensing records.

Moser's biography on Prime Group's website says he started his career as a broker with RJM Properties.

A Prime Group spokesperson declined to comment on the settlement.

Prime Group's investment activity, which has focused on self-storage and manufactured housing, has only grown. It closed on its third fund in January, raising $2.5B for self-storage acquisitions, the largest private equity fund ever raised that focused exclusively on the niche storage real estate sector, according to PERE. Investors in the fund include sovereign wealth funds, public pension funds, university endowments, banks, insurance companies, family offices and foundations from more than 30 countries, Wealth Management reported.

A source familiar with Prime Group said the firm plans to use the same brokerage house to source transactions for Fund III, albeit with proper disclosures.

CORRECTION, SEPT. 7, 11:15 A.M. ET: Prime Group was fined for failing to adequately disclose its relationship to an affiliated brokerage. A previous version of this story indicated the company failed to disclose the relationship at all. This story has been updated.