The SEC is reviewing private equity fees and expenses.

Three private equity fund advisors within The Blackstone Group agreed Wednesday to pay nearly $39 million to settle charges brought by the Securities and Exchange Commission that they breached their fiduciary duties by failing to fully inform investors about benefits they received from accelerated monitoring fees and discounts on legal fees.

Nearly $29 million of the settlement will be distributed to affected fund investors. 

An SEC investigation found that Blackstone Management Partners, Blackstone Management Partners III, and Blackstone Management Partners IV failed to adequately disclose the acceleration of monitoring fees paid by fund-owned portfolio companies prior to the companies’ sale or initial public offering. 

The payments to Blackstone “essentially reduced the value of the portfolio companies prior to sale, to the detriment of the funds and their investors,” the SEC states. The SEC investigation also found that fund investors were not informed about a “separate fee arrangement that provided Blackstone with a much greater discount on services by an outside law firm than the discount that the law firm provided to the funds.”

Julie M. Riewe, co-chief of the SEC Enforcement Division’s Asset Management Unit, noted in a statement that “as the beneficiary of the accelerated monitoring fees, Blackstone violated its fiduciary duty by failing to properly disclose the fees.” Blackstone, she said, “further breached its fiduciary duty by choosing to negotiate a legal fee arrangement with greater benefits for itself than the funds it advised, without properly disclosing the arrangement.”

Andrew Ceresney, director of the SEC’s Division of Enforcement, added that “full transparency of fees and conflicts of interest is critical in the private equity industry and we will continue taking action against advisors that do not adequately disclose their fees and expenses.”

He noted that the Asset Management Unit is continuing its review of private equity fee and expense issues and encourages private equity fund advisors that have identified such issues to self-report them to SEC staff.

Without admitting or denying the SEC findings, Blackstone agreed to cease and desist from further violations, to disgorge $26.2 million of ill-gotten gains plus prejudgment interest of $2.6 million, and to pay a $10 million civil penalty.

Blackstone agreed to distribute $28.8 million to affected fund investors. The SEC says that the settlement reflects Blackstone’s remedial acts and its voluntary and prompt cooperation with the Division of Enforcement’s investigation.