In 2014, the SEC formed the "Private Funds Unit"
(PFU), a multi-disciplinary task force designed to specifically
address matters that had surfaced during their initial round of
"presence examinations" for private funds, which
commenced in 2012. Since that time, much has happened. Examinations
revealed material weaknesses and deficiencies among private equity
firms in the areas of valuation, performance reporting, disclosure
to limited partners and conflicts of interest. The staff of the SEC
has commenced enforcement actions against a number of private
equity firms and indicated that the industry can expect additional
enforcement actions related to the above issues.
Now the SEC has announced a separate sweep for hedge funds. We
believe that recent actions regarding private equity offer some
clear guidance to the nature of this newly announced sweep.
