The private fund adviser industry has fallen under the SEC’s registration authority only since the 2010 Dodd-Frank Act granted the regulator increased oversight beginning in 2012. Fee and expense practices in particular have come under increased scrutiny since mid-2014, when SEC examinations identified high rates of fee- and expense-related violations.
In that round of inspections, the SEC’s Office of Compliance Inspections and Examinations identified “violations of law or material weaknesses in controls” in more than half of the 112 examinations of fee and expense practices of registered investment advisers to PE funds. During the past year – through various speeches, examinations and regulatory settlements – the SEC has reminded the industry (PE and hedge fund advisers) that it expects transparent and detailed disclosures.
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