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Nov. 5 — Private equity disclosure issues are in the crosshairs of the Securities and Exchange Commission, Julie Riewe, a top agency enforcement official, said in a video interview with Bloomberg BNA.
The agency will bring “more conflicts-type cases, as well as fee and expenses” cases, said Riewe, the co-chair of the Asset Management Unit in the Securities and Exchange Commission Enforcement Division.
The agency has expanded its efforts in that arena recently, including recent enforcement actions against Blackstone Group LP and Kolhberg Kravis Roberts & Co.
Riewe recorded the interview after appearing on a panel at the Securities Enforcement Forum in Washington, which was sponsored by Securities Docket.
The SEC is looking at how private equity firms disclose their travel and entertainment expenses, as well as discounts provided to third-party vendors, including law firms, Riewe said.
The agency also is seeking to ensure proper disclosures when advisory employees that “are labeled as consulting partners” are billed to a fund, instead of from management expenses, she said.
Riewe advised that private equity firms should take a look at their longstanding governing documents to ensure that current practices haven't evolved away from what the old disclosures indicate.
Firms are “making sure they’ve disclosed all sorts of conflicts, including any sorts of revenue they’re getting from relationships with affiliates,” which is another area of SEC focus, she added.
In recent cases, Blackstone settled for nearly $40 million in October on allegations of inadequate fee disclosures (47 SRLR 1944, 10/12/15)(195 SLD, 10/8/15)(See previous story, 10/08/15).
KKR settled for almost $30 million in June in connection with allegations that it misallocated “broken-deal” expenses to fund clients (47 SRLR 1334, 7/6/15)(125 DER 125, 6/30/15)(125 SLD, 6/30/15).
And, earlier in November, Fenway Partners LLC settled, for $10 million after SEC accusations that it failed to disclose conflicts of interest in how it handled client money (213 SLD 213, 11/4/15).
To contact the reporter on this story: Rob Tricchinelli in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Phyllis Diamond at email@example.com
The video of the BBNA interview with Riewe is online at /secs-private-equity-m57982063200/.
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