P.E. Firms Clear Up Investor Costs In Revised Disclosures

Nov 21 2014 | 12:42pm ET

Private-equity firms are moving to clean up their disclosure practices in the wake of criticism from the Securities and Exchange Commission.

The regulator said earlier this year that more than half of the p.e. firms it has examined under the Dodd-Frank financial regulation law, more than half were found wanting, particularly when it comes to disclosing fees and expenses. In response, more than 15 firms have updated their annual disclosures to better document those investor costs.

Among the firms making mid-year revisions to the annual Form ADV disclosures are Apollo Global Management and Kohlberg Kravis Roberts, The Wall Street Journal reports.

Apollo, for instance, has for the first time notified investors of so-called monitoring fees and other no-service payments they get from current and former portfolio companies. Sun Capital Partners and Thomas Bravo also revealed those fees. Apollo also said that if a company fails to make a monitoring-fee payment, it can charge its investors—although it said it has never actually done so.

Other firms, including Advent International, are clearing up the costs of operating partners, experts hired by firms to help run portfolio companies. The SEC warned that firms often do not specify that such individuals are not employees, but consultants for whom investors are footing the bill.


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