Articles Tagged with Misleading Investors

On Tuesday, the Securities and Exchange Commission (SEC) fined Apollo Global Management $52.7 million for allegedly breaching its fiduciary duty. Apollo was accused of failing to disclose fees and conflicts of interest to investors. It also failed to adequately disclose to its limited partners that it may accelerate future fees for monitoring portfolio companies when it ended consulting and services agreements. The firm also allegedly failed to supervise a senior partner who charged personal expenses to the funds. The executive who was charged was not named, but was twice caught “improperly charging personal items and services” to Apollo’s funds and its investors. His misconduct took place from early 2010 until mid-2013 and his transgressions included “fabricating information to Apollo in an effort to conceal his conduct.” His investigation is ongoing.

This is the latest in the SEC’s crackdown of private equity firms. Over the last years, the SEC has taken action against 10 private equity firms, including the Blackstone Group and Kohlberg Kravis Roberts & Company. Most of the firms were investigated and fined because of their failure to properly disclose fees and conflicts of interest to fund investors. In the case of Apollo, the SEC claims that the firm failed to fully inform its investors about so-called monitoring fees. The firm charges those fees to some of the companies it owns, and Apollo claims that it is entitled to collect on the consulting and advice it provides these companies.

The SEC also found that Apollo was “accelerating” the monitoring fees when one of its companies was sold or went public. Upon the sale of an IPO, for example, Apollo would turn the years of fees into one lump-sum payment, which would effectively reduce the “amounts available for distribution to fund investors.” Apollo was also accused of failing to fully disclose its practice of accelerating monitoring fees before clients invested in the firm. Apollo was also supposed to pay interest to funds from which it took out loans. The SEC found that that interest was “instead ultimately allocated solely” to the Apollo affiliate itself.

The Securities and Exchange Commission (SEC) recently charged a microcap company, RVPlus, and it’s CEO, Cary Lee Peterson with falsely claiming to have a lucrative relationship with the United Nation and billions of dollars in clean energy contracts with foreign governments. The SEC also claimed that Peterson and RVPlus also made bogus claims in the company’s public filings and in statements to private investors, and that he and RVPlus participated in an unlawful distribution of the company’s stock. The SEC then charged the company and Peterson with violating the antifraud provisions of the securities laws and an SEC antifraud rule. It also charged them with violating the registration provisions of the securities laws and Peterson with aiding and abetting RVPlus’s violations of the antifraud provisions. According to a statement, Peterson allegedly “inflated RVPlus’ finances and expected profitability. He also used a pseudonym, posted hundreds of messages to an online investors’ forum calling RVPlus’ stock ‘undervalued,’ and urged investors to ‘buy up as much as possible.’” He repeatedly claimed that his company had a lucrative relationship with the United Nations worth $2.8 billion. He had no relationship with them and the contracts were false. For these transgressions, the SEC is seeking a permanent injunction, return of allegedly ill-gotten gains with interest, and penalties. It is also seeking to bar Peterson as a corporate officer or director and from participating in the penny-stock business. The U.S. Attorney’s Office for the District of New Jersey announced it would bring criminal charges against him.

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