WASHINGTON (Legal Newsline) — Four private equity fund advisers affiliated with Apollo Global Management will pay $52.7 million for allegedly misleading fund investors about fees on a loan agreement, the Securities and Exchange Commission has announced.
“A common theme in our recent enforcement actions against private equity firms is their failure to properly disclose fees and conflicts of interest to fund investors,” said Andrew J. Ceresney, director of the SEC Enforcement Division. “Investors in Apollo funds were not adequately informed about accelerated monitoring fees and separately allocated loan interest, and, therefore, were unable to gauge their impact on their investments.”
According to the SEC, the Apollo advisers failed to adequately disclose the benefits they received, which adversely affected clients. The advisers allegedly accelerated the payment of future monitoring fees owed by the funds’ portfolio companies when those companies went up for sale or IPO. This meant the advisers received lump sum payments while their clients received a reduced distribution.
“Apollo failed to take appropriate action to protect its clients upon first learning that a partner was improperly expensing personal items and services to the funds, and its failure resulted in repeated misconduct,” said Anthony S. Kelly, co-chief of the SEC Enforcement Division’s asset management unit.