Private equity giant KKR has agreed to pay $30 million to settle allegations that it failed to allocate more than $17 million in expenses to co-investors including KKR executives.

In an order announcing the settlement, the U.S. Securities and Exchange Commission said KKR accumulated $338 million in broken deal or diligence expenses related to unsuccessful buyout opportunities and related issues between 2006 and 2011.

The firm breached its fiduciary duty, the SEC said, by misallocating $17.4 million of those expenses to its flagship private equity funds rather than to co-investors. During the six-year period at issue, co-investors invested $4.6 billion alongside the $30.2 billion invested by the flagship funds.

“This is the first SEC case to charge a private equity adviser with misallocating broken deal expenses,” Andrew Ceresney, director of the SEC Enforcement Division, said in a news release. “Although KKR raised billions of dollars of deal capital from co-investors, it unfairly required the funds to shoulder the cost for nearly all of the expenses incurred to explore potential investment opportunities that were pursued but ultimately not completed.”

Pension plans and other institutional investors will receive refunds from KKR as a result of the SEC settlement.

“I commend the Securities and Exchange Commission for its persistence, on behalf of Connecticut and other investors, concerning the adequacy of the disclosure of fees charged by KKR,” Connecticut Treasurer Denise Nappier told The Wall Street Journal.

Co-investment arrangements allow executives of a firm or its clients to commit capital to individual deals rather than a broad fund. While they can carry more risk, such arrangements “typically allow investors to invest more cheaply and have more visibility into specific deals,” the WSJ said.

Reflecting concerns about increasing co-investment levels, then-SEC compliance director Andrew Bowden warned last year that private equity fee structures had “created an enormous grey area, allowing advisers to charge fees and pass along expenses that are not reasonably contemplated by investors.”

KKR changed its expense-allocation practices in 2012 following an internal review.

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