SEC puts private equity in its sights
SEC official points to 8 cases
By David M. Toll
NEW YORK, Feb 6 (Reuters BUYOUTS) An official in the enforcement canada goose coats on sale division of the Securities and Exchange Commission said late last month that the agency has its eye on several private equity industry practices that could disadvantage investors, such as the charging of deal fees and cherry picking of deals.
Speaking in New York City at a conference hosted by Private Equity International on Jan. buy canada goose jacket 23, Bruce Karpati, the chief of the SEC enforcement division asset management unit, observed that the agency has been bringing more cases involving private equity firms cheap Canada Goose or equity like issues.
He pointed to eight recent cases, including ones involving employees of advisory firm Adams Street Partners and private equity firms Brantley Capital, Onyx Capital and TPG Capital. The accusations range canadian goose jacket from insider trading to misappropriating cheap canada goose uk funds, to usurping investment opportunities, to outright stealing.
of the improper conduct in private equity arises out of conflicts of interest, which can lead to misappropriation, deal cherry picking and other forms of misconduct, Karpati uk canada goose said. In addition, Karpati pointed to the overhang of capital available to be put to work by buyout firms as a potential since it that there is more capital canada goose clearance sale chasing the same number of deals, which puts canada goose uk outlet extra pressure canada goose store on returns.
This, in turn, has led to an environment where many firms are fighting to survive and which Canada Goose Jackets could managers canada goose outlet nyc to engage canada goose black friday sale in aggressive marketing, and may lead some to cross the line into inappropriate behavior, he said.
Karpati went through several potential conflicts of interest that are of particular concern to the SEC:
Karpati observed that the interests of management Canada Goose Coats On Sale companies and investors, such as in the Canada Goose Online setting of management fees, can diverge at all firms. But, he said, the conflict be particularly acute at firms that have listed their shares on canada goose coats public exchanges and are, therefore, subject to pressures from shareholders to canada goose factory officialcanadagoosesoutlet sale produce short term gains.
In their partnership agreements, canada goose clearance private equity shops spell out what expenses are absorbed canada goose by the management company and which ones are absorbed by the fund. Nevertheless, the canada goose uk shop commission is concerned that, in some cases, firms may be using the buying power of their funds to secure lower prices on services the expense of investors.
Buyout firms often charge Canada Goose Outlet portfolio companies fees for investment banking, consulting and other services. Karpati said that Canada Goose online the agency is Canada Goose Parka concerned about the charging of such fees the allowable fees may uk canada goose outlet be poorly defined by the partnership agreement.
In recent canada goose uk black friday years, many of the largest buyout shops have become diversified asset managers, offering a growing list of products and (in some cases) offering better terms for favored investors that make especially big commitments. Some of the behavior that has resulted, said Karpati, includes the shifting of organizational expenses, where commingled vehicles foot the bill for preferred Canada Goose sale clients. In addition, Karpati suggested advisers may be making fund commitments through one vehicle create deal flow for a more profitable co investment vehicle.
Just how tough the SEC will get buy canada goose jacket cheap on such conflicts and the bad behavior that can result from them remains to be seen. But it clear the agency has gotten up to speed on an industry that some accused it only a few years ago of not understanding.