Most private equity general partners did not grow up thinking, “Someday, I’d really like to be a Registered Investment Adviser.” And yet, today that is just what many of them have become, with certificates from the Securities and Exchange Commission to prove it.
The unwelcome transition from boutique firm to regulated investment adviser continues to be a culture shock for many firms, especially those that are smaller and under-resourced, say two compliance experts.
Scott Gluck, counsel at law firm Venable LLP, and Matt Reynolds, director of financial services at McGladrey—who both have observed firsthand the increasing interactions between SEC staff and private funds—say too many GPs are unaware of the agency’s goals and motivations.
“We spoke to a number of our private equity clients and got an idea of (their) biggest frustrations,” says McGladrey’s Reynolds. “What I kept hearing over and over was, ‘I just want to do it right, but the SEC won’t tell me what’s right.’ Well, that’s not their job. Their job is to look at what you do and make sure that it’s in the best interest of the clients.”