The SEC’s Evolving Scrutiny of Private Equity Firms: KKR Hit with an Unprecedented Enforcement Action for Broken Deal Expense Misallocation
Abstract
Purpose
To explain and analyze SEC charges and settlement with Kohlberg Kravis Roberts & Co. (“KKR”) related to misallocation of broken deal expenses.
Design/methodology/approach
Provides background, including other similar SEC enforcement actions in relation to private equity and hedge funds; explains the regulatory violations in KKR’s broken deal allocation methodology and related disclosure; draws lessons and makes recommendations for private equity firms concerning the need for compliance and disclosure reviews and the benefits of remediation and cooperation.
Findings
This enforcement action and other similar ones represents a continuing SEC focus on fee and expense misallocation. It is also relevant to advisers to real estate and hedge fund complexes that face similar allocation issues.
Practical implications
Private equity firms and other advisers to private investment funds should re-evaluate their fee and expense allocation policies and procedures to be sure that they adhere to current regulatory and investor expectations.
Originality/value
Practical guidance from experienced securities enforcement and litigation and investment management lawyers.
Keywords
Acknowledgements
© 2015 Arnold & Porter LLP
Citation
Callahan, V.R., Fleishhacker, E.K., Holton, R., Kaplan, S.A., Lavin, K., Trager, M., Sylvester, M. and Vallabhaneni, P. (2015), "The SEC’s Evolving Scrutiny of Private Equity Firms: KKR Hit with an Unprecedented Enforcement Action for Broken Deal Expense Misallocation", Journal of Investment Compliance, Vol. 16 No. 4, pp. 39-42. https://doi.org/10.1108/JOIC-08-2015-0049
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Authors