UNITED STATES SECURITIES AND EXCHANGE COMMISSION

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 15(b) of the Securities Exchange Act of 1934 ("Exchange Act"), Sections 203(e), 203(f) and 203(k) of the Investment Advisers Act of 1940 ("Advisers Act"), and Sections 9(b) and 9(f) of the Investment Company Act of 1940 ("Investment Company Act") against Gurprit (aka Gurpreet) Chandhoke and VII Peaks Capital, LLC (collectively, the "Respondents"). The Commission finds that these proceedings arise out of breaches of fiduciary duty by registered investment adviser VII Peaks Capital, LLC ("VII Peaks"), and Gurprit Chandhoke, the co-owner, co-principal, and managing member of VII Peaks. VII Peaks and Chandhoke ("Respondents") served as investment advisers to VII Peaks Co-Optivist Income BDC II, Inc. (the "BDC"), a business development company. From late 2015 through 2017, Respondents breached their fiduciary duty to the BDC by engaging in transactions that were not disclosed to or approved by the Board of Directors of the BDC. First, VII Peaks collected over $700,000 in due diligence fees for loans made by the BDC to portfolio companies. At the time, VII Peaks did not disclose it was retaining the fees, nor did it seek approval from the BDC's Board of Directors to keep these fees. These fees created an undisclosed material conflict of interest because Respondents were incentivized to cause the BDC to make loans to portfolio companies in order to generate the fees for themselves. Second, without prior disclosure to the BDC's Board of Directors, Chandhoke entered into two transactions that benefitted him financially and where his interests conflicted with the BDC's. In one transaction, a portfolio company paid a company partially owned by Chandhoke, and for which he served as Chief Executive Officer ("CEO"), $400,000 for technology services. Chandhoke had solicited the portfolio company to enter into the transaction. In another transaction, Chandhoke received an undisclosed $250,000 personal loan from a company owned and controlled by a portfolio company's CEO. Both of these transactions constituted actual or potential conflicts of interest, which Chandhoke failed to timely disclose to, or seek approval from, the BDC's Board of Directors. These two transactions also violated the Investment Company Act because Chandhoke as an affiliated person, was not permitted, absent approval from the Commission, to enter into the two transactions with portfolio companies. Chandhoke never sought or obtained such approval. Lastly, in 2018, in valuing two portfolio companies of the BDC, VII Peaks failed to implement its own valuation policies and procedures during certain quarters, which resulted in a failure to update the quarterly value of assets that later in the year the BDC wrote off as worthless.

Order

Cease and Desist

Prohibition

Suspension

association with a broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or NRSRO

12 months

6/14/2021

6/13/2022

participation in an offering of penny stock

12 months

6/14/2021

6/13/2022

Prohibition from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter.

FINRA

Chandhoke was named a respondent in a FINRA complaint alleging that he and Stephen F. Shea formed two entities together with the intent of engaging in, and did in fact engage in, non-securities business activities, but failed to provide prior written notice regarding those outside business activities to their member firms. The complaint alleges that Chandhoke and Shea's activities included creating and distributing offering materials, soliciting investors, opening and maintaining a bank account on behalf of one entity, and making a down payment for a piece of real property. Later Chandhoke engaged in two additional non-securities business activities without providing prior written notice to his firms. The complaint also alleges that contrary to their firms' WSPs, Chandhoke and Shea failed to disclose outside accounts opened at another FINRA member firm. Chandhoke and Shea had a financial interest in each account because they opened and held the accounts in the names of entities that they owned and controlled. The complaint further alleges that Chandhoke and Shea participated in private securities transactions totaling $9,902,425 without providing written notice of those transactions to their firms prior to their participation. In addition, the complaint alleges that Chandhoke structured 37 cash deposits made into four separate bank accounts in order to evade federal reporting requirements. The deposits, totaling $72,950, were made at automated teller machines in the Los Angeles and San Francisco Bay areas and were structured in amounts below $10,000 for the purpose of attempting to evade federal reporting requirements that would have caused a financial institution to file currency transaction reports. Moreover, the complaint alleges that Chandhoke opened a line of credit at a firm in the name of his entity during which he made a false acknowledgment. When completing and signing documentation necessary to open the account, Chandhoke falsely acknowledged that no part of the line of credit would be used to purchase, carry, or trade in securities. Chandhoke knew at the time he opened the line of credit that he intended to use the proceeds from the line of credit to allow him to purchase securities in another account. Further, Chandhoke did use the proceeds from the line of credit in that manner. Chandhoke also falsely indicated that the purpose of the account was to finance business operations or assets.

Decision & Order of Offer of Settlement

Civil and Administrative Penalty(ies)/Fine(s)

$50,000.00

Suspension

All capacities

two years

11/16/2020

11/15/2022

Without admitting or denying the allegations, Chandhoke and Shea consented to the sanctions and to the entry of findings that they failed to disclose to their employer member firms several OBAs. The findings stated that Chandhoke and Shea together formed two entities with the intent of engaging in, and did in fact engage in, non-securities business activities, but failed to provide prior written notice regarding those activities to their employer member firms. Chandhoke engaged in two additional non-securities business activities but failed to provide prior written notice regarding those outside business activities to his employer member firms. The findings also stated that Chandhoke and Shea failed to disclose to their employer member firms several outside accounts they opened and held at another FINRA member firm. While Chandhoke and Shea were associated with their employer member firms, they opened four accounts at Firm A, a FINRA member firm. Chandhoke and Shea had a financial interest in each account at Firm A because they opened and held the accounts in the names of entities that they owned and controlled. Chandhoke and Shea also failed to inform Firm A in writing or otherwise that they were associated with FINRA member firms. Chandhoke failed to disclose an additional three accounts at Firm A. Chandhoke held a financial interest in each account because he opened and held the accounts in the name of an entity that he solely owned and controlled. Chandhoke also failed to inform Firm A in writing that he was associated with a FINRA member firm. The findings also included that Chandhoke and Shea participated in a number of private securities transactions totaling over $1 million, but failed to provide their employer member firms with prior notice of these securities transactions and never received written approval from their employer member firms to participate in the transactions. FINRA found that Chandhoke structured 37 cash deposits made into four separate bank accounts. The deposits, totaling $72,950, were structured in amounts below $10,000 for the purpose of attempting to evade federal reporting requirements that would have caused a financial institution to file currency transaction reports. FINRA also found that Chandhoke opened a line of credit in the name of his entity Chandhoke Holdings, LLC at a FINRA member firm, but when completing and signing documentation necessary to open the account, Chandhoke falsely acknowledged that no part of the line of credit would be used to purchase, carry, or trade in securities. That acknowledgment was false because, as Chandhoke knew at the time he opened the line of credit, he intended to use the proceeds from the line of credit to allow him to purchase securities in another account. Further, Chandhoke did, in fact, use the proceeds from the line of credit in that manner. Chandhoke also falsely indicated that the purpose of the account was to finance business operations or assets.