SEC Charges Firm with Misallocating Broken-Deal Expenses

The SEC charged a private equity adviser with misallocating "broken-deal" expenses to its flagship private equity funds in breach of its fiduciary duty.

An SEC investigation found that over a six-year period, the adviser incurred $338 million in broken-deal or diligence expenses related to unsuccessful buyout opportunities.

According to the SEC, the adviser did not allocate any portion of these broken-deal expenses to any of the firm's co-investors for years. The SEC also found that the adviser did not disclose expressly in its partnership agreements or related offering materials that it did not allocate broken-deal expenses to the co-investors.

See: SEC Order.