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Bailey McCann, Opalesque New York:

Mega private equity firm KKR is paying a $30 million settlement to the SEC over 'broken deal' expenses. The charges were announced today by the SEC and included a $10 million penalty. KKR had been in talks with the SEC over settlement of these charges since March, as first reported on PE HUB. At that time, the firm's annual report listed a $25 million allocation for potential legal fees.

The SEC alleges that KKR misallocated more than $17 million in broken deal expenses to its flagship private equity funds in breach of its fiduciary duty. An SEC investigation found that during a six-year period ending in 2011, KKR incurred $338 million in broken deal or diligence expenses related to unsuccessful buyout opportunities and similar expenses. Even though KKR’s co-investors, including KKR executives, participated in the firm’s private equity transactions and benefited from the firm’s deal sourcing efforts, KKR did not allocate any portion of these broken deal expenses to any of them for years. KKR did not expressly disclose in its fund limited partnership agreements or related offering materials that it did not allocate broken deal expenses to the co-investors.

According to the order, by managing expenses the way that it did, KKR "viola......................

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