Apollo Says SEC Staff Inquired About Accelerated Fee Collectionby
Firm received 'informal' request for additional information
Blackstone, KKR settled this year with SEC over fee practices
Apollo Global Management LLC said U.S. regulators inquired about the private equity firm’s practice of collecting fees at an accelerated rate.
Apollo “recently received an informal request for additional information” from the Securities and Exchange Commission, New York-based Apollo said in a regulatory filing Monday. The firm said it first provided details of its accelerated collection of certain fees to the SEC during a 2013 exam.
The disclosure comes after Blackstone Group LP and KKR & Co. reached settlements with the SEC over allegations that certain fee and expense practices weren’t properly disclosed to investors. While the firms didn’t admit or deny the SEC’s allegations, both agreed to financial penalties.
Blackstone last month said it would pay almost $39 million, including a $10 million fine, to end an investigation into whether the company benefited from discounts on legal work that weren’t extended to clients and whether the firm took fees at an accelerated pace without earlier notifying investors of the practice.
Monitoring fees, which private equity firms charge companies they own annually for advisory work, were accelerated into lump-sum payments to Blackstone when the firm sold or took a business public ahead of schedule, even when future work wouldn’t be performed. The practice lowered the value of the portfolio companies, reducing potential profits available for clients, the SEC said.
KKR in June said it would pay almost $30 million, including a $10 million fine, to settle a charge that it allowed some investors, including its own executives, to sidestep costs tied to potential deals that weren’t completed.
“The SEC has focused recently on the disclosure to limited partners of the acceleration of certain special fees,” Apollo said in Monday’s filing, adding that it’s “fully and voluntarily cooperating with the informal request.”
Charlie Zehren, an outside spokesman for Apollo at Rubenstein Associates, declined to comment.