On June 29, 2015, the SEC charged Kohlberg Kravis Roberts & Co. L.P. ("KKR"), an SEC-registered investment adviser, with misallocating more than $17 million in broken deal and diligence expenses to its flagship private equity funds in breach of its fiduciary duties under the Investment Advisers Act of 1940 (the "Advisers Act"). KKR agreed to a $10 million penalty and to pay more than $14 million in reimbursements. The settlement is a significant enforcement action with respect to the allocation of fees and expenses – an area that the SEC has indicated is one of regulatory focus for the industry. 1 Summary of the SEC Action The SEC found that from 2006 to 2011 KKR had incurred $338 million in broken deal or diligence expenses related to buyout opportunities that had not resulted in a transaction. These broken deal expenses included costs for research and travel and professional fees, as well as other expenses incurred in sourcing deals that never closed.