SEC Enrolls in Private Equity 101 —PE Manager

With Limited Resources, the SEC is Using a “Risk Analytics” Strategy to Target Areas of Concern, Explains Exec at Conference

Recent examinations of newly SEC-registered private equity firms is helping regulators understand the complex world of private equity, according to delegates and speakers at PEI’s CFOs and COOs Forum 2013 in New York, writes Nicholas Donato at Private Equity Manager.  More:

“We want to understand the structure of the industry, the customs and practices, the incentives that exist for managers, and trends and risks that could enable us to more effectively spot or investigate fraud.”

Those were the words of Bruce Karpati, addressing an audience of private equity compliance officers and other back office professionals eager to hear what message the US Securities and Exchange Commission’s top enforcement chief had for them. Kaparti was speaking at PEI’s CFOs and COOs Forum 2013, now in its tenth year, and stressed the SEC has taken pains to better understand the asset class and wider alternative assets industry. 

“First, we have hired industry specialists that have deep asset management industry experience. For example, our private equity specialist has been a deal professional executing transactions, as well as an LP performing manager selection at a large institution,” Karpati said. He went on to add that several attorneys are also on hand with “practical private equity investigative experience”.   

During sideline conversations delegates challenged Karpati’s assertion that a sole private equity specialist would deliver a better understanding of the asset class at an organisation-wide level. Karpati’s Asset Management Unit (AMU) enforcement team has approximately 75 staff members across 11 offices, a relatively small figure compared to the roughly 4,000 private fund advisors under the SEC’s watch.   Due to limited resources, the SEC is using a “risk analytics” strategy designed to target fund managers who appear to pose a higher risk of fraudulent behaviour, an enforcement initiative PE Manager reported earlier this month. 

Read the whole thing here. 

 

The SEC is Studying the Private Equity Industry

 

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