The Real Deal Miami

Blackstone fined by SEC, will pay $39M

Private equity firm dinged over "accelerated monitoring fees"

October 09, 2015 10:30AM

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Steven Schwarzman

Steven Schwarzman

From the New York websiteThe Blackstone Group is known for their shrewd investments, but it turns out some of its income comes from less noble endeavors.

The private equity firm settled with the Securities and Exchange Commission, agreeing to pay $10 million in fines and $29 million in reimbursements.

The money will be returned to companies Blackstone owns, which it charged for non-existent services, called “accelerated monitoring fees.”

Between 2007 and 2011, Blackstone realized greater discounts on the firms’ legal work than its partners, according to the SEC.

Some investments led to monitoring fees that weren’t disclosed to clients when they committed to Blackstone, the regulatory agency said.

The firm first disclosed the SEC investigation in a May regulatory filing. Blackstone did not admit or deny the allegations in the settlement.

“This SEC matter arose from the absence of express disclosure in marketing documents, ten or more years ago, about the possible acceleration of monitoring fees, a common industry practice,” said Blackstone Peter Rose in a statement. “Each accelerated fee was, however, as the SEC order acknowledges, disclosed when received and our Limited Partner Advisory Committee did not exercise its right to object. Moreover, Blackstone voluntarily made changes to the applicable policies well before this inquiry was begun.”

The Real Deal profiled the company’s real estate division and its head, Jonathan Grey, in its September issue. [Fortune]Ariel Stulberg