by Michael Krieger
Despite the at times disconcertingly polite tone, the SEC has now announced that more than 50 percent of private equity firms it has audited have engaged in serious infractions of securities laws. These abuses were detected thanks to to Dodd Frank. Private equity general partners had been unregulated until early 2012, when they were required to SEC regulation as investment advisers.
Bowden pointed out that private equity is unique among the investment advisers the SEC supervises. The general partners’ control of portfolio companies gives them access to their cash flows, which the GPs can divert into their own pockets in numerous ways.
Is this the beginning of the end for the damaging and often predatory relationship between public pensions and “alternative asset managers” such as hedge funds and private equity? It should be.
Here’s what I had to say on the matter in January’s post, Additional Details Emerge on How Hedge Funds and Private Equity Firms Loot Public Pensions: