The most prominent financial regulator in the US has clamped down on a former private equity advisor and his firm, permanently banning him from his industry.

The US' largest financial regulator has permanently exiled a private equity advisor from the securities industry, ordering him to pay a $1.25 million penalty to settle charges that he withdrew improper fees from two funds that he managed.

The Securities and Exchange Commission said that Scott Landress formed the funds to invest in real estate trusts with underlying investments in properties throughout the UK. His investment advisory firm, SLRA, earned management fees based on the net asset value of the underlying investments. 

SLRA's fees shrank and its management costs increased as real estate property values tumbled during the financial crisis, and the funds' limited declined several requests by Landress for additional compensation to cover the shortfalls, the financial watchdog said.

According to the SEC's order, Landress directed his firm to withdraw £16.25 million ($20.3 million) from the funds in early 2014 under the guise as payment for several years of services provided by an affiliate and then transferred the money to his personal account. 

SLRA and Landress failed to disclose the transaction and the resulting conflicts of interest until after the money had been withdrawn. 

Landress and SLRA returned the withdrawn service fees to the funds after the SEC began its investigation into the matter, the regulator said.

“Private equity fund advisors have a duty to act in the best interest of their clients, but Landress and SLRA helped themselves to millions of dollars’ worth of fees to which they had no legitimate claim,” said Scott Friestad, associate director of the SEC’s division of enforcement.