By Lucy Ren

WASHINGTON — Kohlberg Kravis Roberts & Co., the New York based-private equity giant, Monday agreed to pay nearly $30 million to settle Security and Exchange Commission charges that the firm unfairly charged expenses to its flagship funds instead co-investors in so-called “broken deals.”

The SEC investigation found that, KKR’s co-investors, which include the firm’s executives, participated in the firm’s private equity transactions without assuming the so-called “broken deal” expenses, which are the costs incurred to explore potential investment opportunities that were ultimately were not completed.

Clients of KKR private equity funds, or the limited partners, inappropriately assumed the entire expense burden for such failed transactions, the SEC said.

“This is the first SEC case to charge a private equity adviser with misallocating broken deal expenses,” said Andrew J. Ceresney, director of the SEC Enforcement Division, in a statement.

The nearly $30 million settlement includes a $10 million penalty and a $3.26 million refund that the company paid to its investors previously.

“KKR’s failure to adopt policies and procedures governing broken deal expense allocation contributed to its breach of fiduciary duty,” said Marshall S. Sprung, co-chief of the SEC Enforcement Division’s Asset Management Unit.

The Asset Management Unit has been investigating the private equity industry to ensure that fund managers are fairly allocating fees and expenses to investors.

Listed as a “top SEC priority” under the fiscal 2015 budget request, the SEC added staff last year to expand its examination program on the investment management industry, which includes private equity firms.

“A robust compliance program helps investment advisers ensure that clients are not disadvantaged and receive full disclosure about how fund expenses are allocated,” said SEC’s Sprung.

“This resolution, which relates to historical expense allocation disclosures and policies and not to any current practices, allows us to focus on delivering value for those who invest with us,” KKR said in a statement regarding the case. “KKR is firmly committed to upholding the highest governance and transparency standards, and we remain dedicated to continually enhancing our practices on behalf of our fund investors.”