October 7, 2015

Three private equity fund advisers within The Blackstone Group will pay nearly $39 million to settle charges they failed to fully inform investors about benefits that the advisers obtained from accelerated monitoring fees and discounts on legal fees.  An SEC investigation found  that advisers Blackstone Management Partners, Blackstone Management Partners III, and Blackstone Management Partners IV, failed to adequately disclose the acceleration of monitoring fees paid by fund-owned portfolio companies prior to the companies’ sale or initial public offering.  These payments essentially reduced the value of the portfolio companies prior to the sale, to the detriment of the funds and their investors.  Additionally, the fund investors were not informed about a separate fee arrangement that provided Blackstone with a much greater discount on services by an outside law firm than the discount the law firm provided to the funds.  SEC

Tagged in: Regulatory Violations, Securities Fraud,