Apollo Global Management has agreed to a $52.7 million settlement following charges that it misled investors regarding fee practices.
The US Securities and Exchange Commission (SEC) said Tuesday that Apollo advisers failed to “adequately disclose the benefits they received to the detriment of fund investors by accelerating the payment of future monitoring fees.”
The regulator also accused the private equity firm of failing to disclose information about interest payments made on a loan intended to defer taxes on carried interest. Apollo neither admitted nor denied the charges.
“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 Ceresney, director of SEC enforcement. “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.”
Apollo had revealed in its November 10-Q filing that the SEC had informally asked for additional information on “disclosure to limited partners of the acceleration of certain special fees.”
At the time, Apollo said it was “fully and voluntarily” cooperating with the request.
“Long before the SEC inquiry began, Apollo had enhanced its disclosure and compliance relating to these matters, reflecting the firm’s commitment to uphold the highest standards of governance and transparency as it focuses on delivering exceptional value to its fund investors,” the firm said in a statement Tuesday.
In addition to these charges, the SEC also said that Apollo failed to properly supervise a senior partner who charged personal expenses to fund clients. After the partner was caught twice, Apollo “took no further remedial or disciplinary steps” beyond “verbally reprimanding the partner and requiring repayment of improperly submitted expenses.”
Eventually, a firm-wide expense review revealed the partner had continued to charge personal expenses to the Apollo funds, resulting in his departure from the firm.
“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 Kelly, co-chief of the enforcement division’s asset management unit.
Apollo’s settlement follows similar charges made by the SEC against Blackstone and KKR last year. The SEC is also examining the fee practices of Carlyle and Silver Lake, according to 10-K filings and the Wall Street Journal.
SEC Examining Carlyle, Apollo Fee Practices