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.