Private Equity Firm Pays $20 Million Fine for Compliance Shortfalls
A private equity firm agreed to pay a $20 Million fine for failing to adopt and implement reasonable compliance policies and procedures. The firm also agreed to retain an independent compliance consultant and deliver the enforcement order to every client and prospective client. The SEC alleges that the firm’s weak compliance program resulted in failures to disclose insider loan transactions, report required gifts, maintain required books and records, and properly document trade errors. The SEC says that the firm relied on its parent company for legal and compliance support and that certain issues were not properly reported to, and addressed by, the compliance staff.
OUR TAKE: Private equity firms that register as investment advisers should retain dedicated and experienced Advisers Act compli-pros to implement the compliance program. Corporate legal or compliance personnel may not have the focus, resources, or knowledge to satisfy the Adviser’s Act myriad requirements. Firms that fail to take compliance seriously risk significant public exposure and financial penalties that can have a long-range effect in a competitive marketplace.