More Enforcement Actions Looming for Private Equity 

The Acting Director of the SEC’s Office of Compliance Inspections and Examinations, Marc Wyatt, said that the private equity industry should expect additional enforcement actions arising from the initial wave of presence examinations.  Mr. Wyatt said that it may take 2 years or longer for the Enforcement Division to take action after OCIE uncovers misconduct.  Mr. Wyatt also said that future OCIE exams will review real estate advisers’ opaque disclosure about ancillary service fees.  Additionally, OCIE continues to assess how firms allocate expenses between insider funds and main funds and co-investment allocation practices.  Mr. Wyatt said that the private equity industry has changed significantly since Dodd-Fran as the SEC has led reform of disclosure practices and institutional investor operational due diligence.

OUR TAKE: Private equity firms should create a robust compliance infrastructure including policies and procedures to satisfy the SEC and institutional investors that they have adequately addressed risks and disclosures.  Only through significant regulatory risk management can firms avoid the devastating reputational and financial impact of an enforcement action.

http://www.sec.gov/news/speech/private-equity-look-back-and-glimpse-ahead.html