Despite perceptions, the Securities and Exchange Commission does not have a “laser focus” on private equity, rather the agency is now examining an industry that wasn’t regulated five years ago, bringing oversight up to the “level where hedge funds are,” Igor Rozenblit, co-head of the agency’s Private Funds Unit, said Wednesday.
Speaking at the Global Private Equity Conference in Washington, Rozenblit said that the SEC now has to “regulate this new asset class that we weren’t familiar with before.”
The Dodd-Frank Act modified some investment advisor exemptions and required many private equity funds to register with the Commission.
During the agency’s 2012 “presence exams” initiative to audit newly registered private fund advisors, the Private Funds Unit, housed within the SEC’s Office of Compliance Inspections and Examinations, said “‘let’s first understand what the incentives are [and] tease out where the investor protection issues may be,’” Rozenblit said.
After those exams, the agency decided to focus on “fees, expenses and valuations,” he said.
“We’ve taken an investor protection view of regulating private equity,” Rozenblit told attendees. “From us what it means is we really try to study incentives.”
The Private Funds Unit of 12 examiners, he said, is “studying” three areas:
Conflicts of interest “broadly is important,” Rozenblit said, and is “firm specific.”