Last month, I noted here that Marshall S. Sprung, co-chief of the SEC Division of Enforcement’s Asset Management Unit since 2013, was leaving the agency after 13 years of service. Sprung's next move was unknown at the time, but Bloomberg reported last week that Sprung is joining Blackstone Group LP as a managing director and the firm's global head of compliance. The news of Sprung's move to Blackstone came the same week as SEC Enforcement Director Andrew Ceresney's speech at Securities Enforcement Forum West, at which he emphasized the Enforcement Division’s heightened focus on private equity.
Blackstone Group, a publicly-traded company, is the parent company for numerous private equity funds and is reportedly the largest manager of alternative assets with approximately $341 billion in assets under management. In October 2015, three private equity fund advisers within Blackstone Group agreed to pay nearly $39 million to settle SEC charges that they failed to fully inform investors about benefits that the advisers obtained from accelerated monitoring fees and discounts on legal fees.
In his speech, SEC Enforcement Director Andrew Ceresney stated that the Enforcement Division's specialized Asset Management Unit has now brought eight enforcement actions related to private equity advisers — "with more to come" — and he pointed to the Blackstone case as one that vividly illustrates one of the AMU's main area of focus in the private equity area: undisclosed fees and expenses. He added that the SEC was also particularly focused on two other areas: advisers that impermissibly shift and misallocate expenses; and advisers that fail to adequately disclose conflicts of interests, including conflicts arising from fee and expense issues.
While co-chief of the AMU, Sprung led the SEC's case against private equity firm KKR & Co. in which it alleged that KKR misallocated more than $17 million of “broken deal” expenses. KKR settled the case for almost $30 million. He also led the SEC's case against R.T. Jones Capital Equities Management, the SEC's first enforcement action against a regulated entity for a cybersecurity-related violation. Sprung's former co-chief, Anthony Kelly, is now chief of the AMU.