The investment adviser to a register fund agreed to pay over $3.3 Million in disgorgement and penalties for failing to properly supervise an unaffiliated sub-adviser.  The SEC charges that the sub-adviser never performed the services that both the sub-adviser and the respondent represented to the Board in the annual 15(c) contract renewal process.  The respondent agreed to repay the entire $1.8 Million in fees paid to the sub-adviser over a 10-year period and pay another $1.5 Million in penalties.  The SEC alleges that the respondent did not have oversight procedures including verifying services or conducing on-site due diligence reviews.  As part of the settlement, the respondent agreed to certify each quarter that every unaffiliated service provider actually performs the services described and obtain a similar certification from the service providers.  The SEC charges violations of Section 15(c) of the 1940 Act as well as Rule 206(4)-7 of the Advisers Act for failing to adopt reasonable policies and procedures.  The SEC noted that the Board relied on the representations provided by both the respondent and the sub-adviser in annually approving the contract.