The SEC is still hyping some investigations into Wall Street. This week, the agency issued a press release announcing that Deutsche Bank AG had agreed to pay about $4.5 million to settle allegations that it inflated its earnings after misleading clients about how much bonds backed by commercial mortgages were worth.
Minor Infractions
Under Clayton’s predecessor, former federal prosecutor Mary Jo White, financial executives frequently took umbrage with the SEC calling them out over what they considered minor infractions.
The private-equity cases involving TPG and other firms are good examples. They centered on so-called monitoring fees that PE firms charge the companies they own for consulting and legal work. The fees are ultimately paid by a PE firm’s investors because it’s their money that’s used to buy the companies in the first place.
The SEC said disclosures tied to monitoring fees were misleading, especially the fact that PE firms often accelerated the expenses when portfolio companies were sold or taken public. In other words, fees that were supposed to be paid out over 10 years were paid out all at once for work that was never performed.
Still, for firms that manage billions of dollars, the amount of money at stake was trivial. In a statement, TPG pointed out that the SEC’s enforcement action pertained to fees charged at least eight years ago that were disclosed to investors. It seems like the regulator now wants to turn the page too.
This article was provided by Bloomberg News.