Business Compliance Audits for Private Equity Funds

Many private equity (PE) firms in the U.S. face SEC (Securities Exchange Commission) actions because of failure to abide by SEC rules or innocent misinterpretations of such rules. Noncompliance with SEC rules, among other regulations necessary for PE funds to operate, comes with effects such as civil penalties, seizure of assets, and prison time in some cases.

The rules governing how private equity funds operate keep changing. Regulators and other enforcement agencies are also increasingly strict on PE funds compliance.

Corporate Investigation Consulting offers business compliance audits to ensure funds comply with all applicable laws to the letter. We also help PE funds establish compliance programs to deal with the unique investment style and complicated legal structures of such funds.

Fund managers are ultimately responsible for compliance with all rules affecting their business. Given the countless and everchanging compliance landscape, increased scrutiny, and penalties for noncompliance, private equity funds need business compliance audits from experts like us.

We address all compliance factors, from fees and expenses to cybersecurity, data privacy, company valuations, and more. Call us: 866-352-9324 and get a FREE-non-obligatory & confidential consultation.

Put our highly experienced team on your side

Roger Bach
Roger Bach

Former Special Agent
(DOJ-OIG & DEA)

Timothy E. Allen
Timothy E. Allen

Former Senior Special Agent
(U.S. Secret Service & DOJ-OIG)

Chris Quick
Chris Quick

Former Special Agent
(FBI & IRS-CI)

Maura Kelley
Maura Kelley

Former Special Agent
(FBI)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent
(FBI)

Michael Koslow
Michael Koslow

Former Supervisory Special Agent
(DOD-OIG)

Marquis D. Pickett
Marquis D. Pickett

Special Agent
U.S. Secret Service (ret.)

Dennis A. Wichern
Dennis A. Wichern

Former Special Agent-in-Charge
(DEA)

Quick Facts on SEC Guidelines on Private Equity Funds

For PE funds to start managing assets, they must comply with SEC registration guidelines. Corporate Investigation Consulting can conduct business compliance audits ensuring your firm:

Manages and discloses any conflicts on investment allocation across multiple funds. There also needs to be proper disclosure of co-investments/special purpose vehicles, allocation of fees and expenses among portfolio companies, funds, etc., and adequate supervision, and disclosure of operating partners among other third parties who offer solutions but aren’t employees.

The SEC also expects PE funds to train and oversight their employees accordingly through written internal processes and policies meant to control the use of material non-public information.

Corporate Investigation Consulting’s business compliance audits assess for compliance to the above SEC guidelines and many others.

Why Should Private Equity Funds Care about Compliance? Main Reasons

There are many reasons for PE funds to comply with applicable laws, regulations, and industry standards. The main reasons include:

To Enhance a Firm’s Standards

PE funds target companies with strong growth potential. However, there are other factors that come into consideration, including the presence of robust compliance programs that ensure the highest standards of doing business. Compliance programs are important to PE funds when choosing investments since they are part of PE firm’s own requirements for investors and business partners.

PE funds make investment decisions that have a great impact on their reputation. Investing in firms that lack compliance programs also means more cost to bring such companies up to the PE’s acceptable standards.

PE funds are also in the business of buying and selling their assets. Exiting is part of a PE firm’s activities. Selling companies via IPOs comes with immense scrutiny. Compliance of such firms is non-negotiable. PE firms that are non-compliant in their own internal processes, polices, and applicable regulations don’t stand a chance in taking companies public.

Our business compliance audits enhance a PE firm’s standards, making it possible to conduct acquisitions, public listings, mergers, and other business activities seamlessly.

To Minimize Risks

PE funds face increased public scrutiny and regulatory pressure globally today to the extent of being held culpable for the actions of affiliate companies based on the level of due diligence done and controlling stake. PE firms can face fines or legal action for a portfolio company that isn’t compliant even if they don’t fully own the company.

Prioritizing compliance is also important for avoiding successor liability. Typical due diligence processes don’t cover all possible risks. A PE fund that buys a “tainted” company or asset unknowingly can still face legal risks in the future.

PE funds also face risks in their own internal processes, policies, and financials. Failure of staff to understand and adhere to regulations, internal policies and/or industry standards can land PE funds in problems.

It’s obvious why private equity funds need business compliance audits. Corporate Investigation Consulting goes over and beyond typical auditing processes to minimize direct and indirect risks out of the actions of their staff, portfolio companies.

To Protect Against DOJ Third Party Action Rules

It takes time for PE funds to know who they are working with. Corporate Investigation Consulting can provide such assurances necessary for making investment decisions. PE firms must have adequate legal protections. Most global companies today require all their business partners to clearly outline their compliance efforts in their legal agreements. PE firms need to know how their partners will adhere to relevant regulations. This is in line with DOJ regulators holding companies culpable for the actions of individuals (third parties) acting on their behalf.

In fact, most of the DOJ’s cases are based on the actions of third parties like consultants, sales agents, among other actors who take part in illegal actions like bribery or act negligently on behalf of companies.

We can audit all portfolio companies and persons who do business on your behalf to reduce third-party action risks. We have former intelligence officers, legal experts, former prosecutors, former special agents, among other professionals that understand how to deal with private equity compliance issues.

Business Compliance with Corporate Investigation Consulting

Compliance creates value in the PE world. Businesses that are bought and sold by PE funds must meet certain standards. Business compliance audits are part of the rigorous process of establishing what companies PE firms should buy or sell. PE firms themselves also need to abide by the ever-changing regulations and public scrutiny.

We can create unique compliance programs for PE firms that cover every aspect, from internal processes and policies to regulatory and financial compliance. Our programs also assess the compliance levels of businesses PE funds are about to buy/sell to avoid legal risks, successor liability, reputation damage, and other related problems.

Our business compliance audits add an extra layer of protection to existing audit processes making PE firms capable of withstanding increasing regulatory scrutiny today. Talk to our compliance experts now! We have a free, confidential initial consultation. Call us at 866-352-9324, or contact us online.

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