Activism

Controversy over Blackstone IPO

The AFL-CIO, the US union group, has accused private equity group Blackstone of structuring its initial public offering (IPO) to avoid having to comply with the Investment Company Act of 1940.

In a letter to the US Securities and Exchange Commission (SEC), the union accuses Blackstone of attempting to hide the fact that its IPO is in fact an offering of interests in pools of investment securities. Blackstone, said the AFL-CIO, is attempting to sell interests in its investment funds to the public while not complying with rules protecting the public.

Richard Trumka, AFL-CIO secretary-treasurer, said: “Blackstone wants to book profits on investment assets like an investment company and claim the tax benefits of an investment company, but refuses to comply with the laws governing investment companies. That’s unacceptable and the SEC should step in and enforce the law”.

The union warned that if Blackstone can avoid SEC regulation, mutual funds, hedge funds and other investment pools will begin using similar strategies to circumvent regulation and disclosure requirements when selling securities to the general public.

June 2007