Connect with us

Hi, what are you looking for?

Jewish Business News

Business

SEC fines KKR nearly $30 million over ‘broken’ buyout charges

SEC Charges KKR With Misallocating Broken Deal Expenses

Henry_Kravis-George-Roberts-KKR-COURTESY

KKR will pay $30 million to settle allegations that the private equity giant breached its fiduciary duties by misallocating more than $17 million in so-called broken deal costs to its flagship private equity funds.

The Securities and Exchange Commission today charged Kohlberg Kravis Roberts & Co. (KKR) with misallocating more than $17 million in so-called “broken deal” expenses to its flagship private equity funds in breach of its fiduciary duty.
KKR agreed to pay nearly $30 million to settle the charges, including a $10 million penalty.

Please help us out :
Will you offer us a hand? Every gift, regardless of size, fuels our future.
Your critical contribution enables us to maintain our independence from shareholders or wealthy owners, allowing us to keep up reporting without bias. It means we can continue to make Jewish Business News available to everyone.
You can support us for as little as $1 via PayPal at office@jewishbusinessnews.com.
Thank you.

The SEC Enforcement Division’s Asset Management Unit has been scrutinizing the private equity industry to make sure that fund managers aren’t misallocating or unfairly charging fees and expenses to investors. An SEC investigation found that during a six-year period ending in 2011, KKR incurred $338 million in broken deal or diligence expenses related to unsuccessful buyout opportunities and similar expenses. Even though KKR’s co-investors, including KKR executives, participated in the firm’s private equity transactions and benefited from the firm’s deal sourcing efforts, KKR did not allocate any portion of these broken deal expenses to any of them for years. KKR did not expressly disclose in its fund limited partnership agreements or related offering materials that it did not allocate broken deal expenses to the co-investors.

“This is the first SEC case to charge a private equity adviser with misallocating broken deal expenses, ” said Andrew J. Ceresney, Director of the SEC Enforcement Division. “Although KKR raised billions of dollars of deal capital from co-investors, it unfairly required the funds to shoulder the cost for nearly all of the expenses incurred to explore potential investment opportunities that were pursued but ultimately not completed.”

The SEC’s order instituting a settled administrative proceeding also finds that KKR failed to implement a written compliance policy governing its fund expense allocation practices until the end of the six-year period in 2011.

“KKR’s failure to adopt policies and procedures governing broken deal expense allocation contributed to its breach of fiduciary duty, ” said Marshall S. Sprung, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. “A robust compliance program helps investment advisers ensure that clients are not disadvantaged and receive full disclosure about how fund expenses are allocated.”

Newsletter



Advertisement

You May Also Like

World News

In the 15th Nov 2015 edition of Israel’s good news, the highlights include:   ·         A new Israeli treatment brings hope to relapsed leukemia...

Entertainment

The Movie The Professional is what made Natalie Portman a Lolita.

Travel

After two decades without a rating system in Israel, at the end of 2012 an international tender for hotel rating was published.  Invited to place bids...

VC, Investments

You may not become a millionaire, but there is a lot to learn from George Soros.