TPG to Pay $13 Million Over SEC Allegations It Misled Investors

(Bloomberg) -- TPG Capital will pay about $13 million to settle claims it made misleading disclosures about fees it collected from buyout targets, becoming the latest private equity giant sanctioned in a broad investigation into whether firms put their own interests ahead of investors.

At issue are payments that TPG received for advisory services from companies it bought. TPG failed to disclose to its investors that it sometimes accelerated those fees so that it got them immediately when it sold a company or held an initial public offering, the U.S. Securities and Exchange Commission said in a Thursday statement.

TPG, which manages about $52 billion, will pay a $3 million fine and about $9.8 million in disgorgement. In settling the case, it didn’t admit or deny the SEC’s allegations.

“The SEC matter at hand relates to the absence of express disclosure in marketing documents, eight or more years ago, about the possible acceleration of monitoring fees, a then-common industry practice,” TPG said in a statement. “As the SEC order acknowledges, TPG disclosed its receipt of these fees.”

Industrywide Investigation

Wall Street’s top regulator has fined some of private equity’s biggest names over similar infractions, including Apollo Global Management and Blackstone Group LP. The SEC has said that in many instances buyout firms pocketed millions of dollars for services they didn’t actually perform and that the charges were often hidden or misunderstood by investors. 

The agency has also raised concerns that such fees lowered the value of portfolio companies, which reduces potential profits for investors.

When private equity firms purchase companies they typically enter into agreements in which they can collect what are known as monitoring fees for up to 10 years. But if the company is sold or holds an IPO, fees that haven’t been been paid can be triggered immediately. While TPG disclosed that it received monitoring fees, the firm failed to tell investors that it might accelerate such charges, the SEC said.

©2017 Bloomberg L.P.