The SEC has announced that over half of the private-equity firms it has investigated have charged unjustified expenses and fees to investors without their knowledge. The 2010 Dodd-Frank Act gave the SEC more power in overseeing money managers and allowed the SEC to examine some firms for the first time. At the close of 2012, the SEC’s examiners had found that particular advisers were wrongfully collecting money from companies included in their portfolio, improperly calculating fees, and using assets from the funds to pay for their own expenses. Bloomberg has reported that some of these issues are the products of mistakes while others are intentional .
Private-equity firms utilize debt and investor capital to purchase companies that they will subsequently go public with or sell for profit. Annual management fees are usually 1.5-2% of committed funds and the firms usually keep 15-20% of the investment profits. Many buyout firms will charge fees to the companies they acquire to help pay for related expenses. Investors sometimes get part of the proceeds. Private-equity firms have been the subject of criticism. Some critics say that abuse by such firms can happen because the organizations tend to be so “opaque.” Managers receive wide discretion, which can make it difficult for investors to know what is happening .
If you or someone you know has lost money as a result of an investment, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies.