These are my live notes from PEI’s Private Fund Compliance Forum.
They are likely to be incoherent and full of typos.
Expert networks. The risk in using them came to the surface in 2010 when an insider trading case came out with and expert network involved in the distribution of information. Law enforcement has come out and said that expert networks are not inherently illegal. They must abide by the same rules on confidentiality and material non-public information. Expert network firms have increased their internal compliance programs to address some of the issues. Firms that use expert networks firms have also put controls and compliance in place.
FCPA enforcement continues. There is a tension with taking over the FCPA compliance for portfolio companies. They may be better able to identify their risks and train their employees.
CCO Liability. There is likely to be no liability if you are doing your job. There is almost liability if you are doing a good job. (That means tailoring the program to your firm, staying knowledgeable, being diligent.)
Fund Expenses. (Everyone is talking about Bowden’s speech.) Compliance should oversee some aspects of the expenses charged to the fund. Perhaps fund expenses are approved by the CFO and portfolio company charges are approved by the responsible investment manager.
The risk alerts from the SEC generally precede enforcement actions. Expect to see several enforcement actions related to private equity fund expenses being revealed in the near future.
Political Contributions. Send out frequent reminders. Seek regular confirmations from employees.
