An investment firm that is being acquired by Blackstone Group agreed to settle a U.S. regulator's claims that it improperly paid brokers to sell its mutual funds.
First Eagle Investment Management, which manages the $46.5 billion First Eagle Global Fund and $13.7 billion Overseas Fund, reached an agreement with the Securities and Exchange Commission to end the investigation, the company said in a securities filing Friday. First Eagle, which agreed to be bought in July by Blackstone and Corsair Capital, didn't disclose the penalties it would pay to resolve the investigation. Details of the settlement could change because the deal hasn't been approved by SEC commissioners, according to the filing.
The case against First Eagle stems from an examination the SEC began more than two years ago. SEC investigators focused on payments that brokers demanded for shareholder accounting services, such as tracking investors' purchases and sales of fund shares. Funds can run afoul of rules if they don't disclose those fees were at least partly made to compensate brokers for selling the fund to new investors.
“Many of these services are primarily administrative, but the SEC believes they may be joined at the hip with distribution,” said Jay Baris, a partner at law firm Morrison & Foerster who chairs its investment fund practice. “They argue the fund wouldn't be paying for these services” if brokers weren't marketing them to clients, Mr. Baris said.
First Eagle said it doesn't expect the settlement to hurt its business, according to the filing.