The SEC Has Revealed Astounding Corruption in Private Equity

[okaawhatever]

And, for once, the commission is not letting them get away with it

When liberals talk about economic regulation, they often use eye-rolling abstractions like “accountability” and “transparency.” What do those things even mean? How are those objectives enforced, and what would this enforcement even look like? Luckily we have a real-time example of what it all means, courtesy of Dodd-Frank and the SEC. It involves one of the more controversial parts of the financial markets, and it gives us a view into how reform happens.

As a result of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, private equity firms must register with the Securities and Exchange Commission (SEC). This, in turn, allows the SEC to examine the behavior of private equity firms on behalf of investors. The SEC just completed an initial wave of 150 firms, and what it found is shocking.

These results were unveiled last week when Andrew Bowden, the director of the SEC’s examinations office, gave a speech titled “Spreading Sunshine in Private Equity.” The big takeaway: Half of the SEC’s exams find corruption in the way fees and expenses are handled. Or as Bowden forcefully describes it: “When we have examined how fees and expenses are handled by advisers to private equity funds, we have identified what we believe are violations of law or material weaknesses in controls over 50 percent of the time.”

SNIP

Republicans are fighting this.
Many people argue that the Tea Party is against cronyism and the corrupt parts of the financial industry. Yet right now House Republicans are fighting to repeal the part of Dodd-Frank that allowed for this examination. Specifically they are putting a lot of energy into H.R. 1105, the ironically named Small Business Capital Access and Job Preservation Act, which would have prevented the SEC from finding this corruption. 94 percent of House Republicans voted for H.R. 1105 (218 votes), while only 18 percent of House Democrats (36 votes) did. It’s unlikely to go anywhere as President Obama has threatened to veto it.

Continued at Link:
http://www.newrepublic.com/article/117735/private-equity-fraud-how-firms-are-ripping-their-investors

Absolutely worth the read. If you care at all about financial markets and their effect on this country you'll take the time to read this. Legislation is at stake, and that means we all have a say (if we vote).

[woolldog]

1. sounds like millionaires ripping off other millionaires....

why should most care about this?

[okaawhatever]

3. From the article section on : Unions, organizing and playing the long game

These revelations about private equity are directly the result of Dodd-Frank. And discussing with people familiar with how the bill progressed through Congress, there’s one big reason that this ended up in there: Unions fought for it. Especially the AFL-CIO, which fought to get this specific language into the bill. In 2007, the AFL-CIO issued a statement urging the SEC to be able to exam private equity firms this way.

SNIP

In addition to having organizations fighting for transparency in financial markets, playing a long game matters. As Damon Silvers, Policy Director and Special Counsel for the AFL-CIO, told me, “certain policy ideas are kicked around for a very long time, and then there’s a window of opportunity. We fought for this for 15 years, and it’s a good lesson that you push for good ideas even when they don’t seem practical. Because when the window hits, you want to have solid ideas ready to go.”

[blkmusclmachine]

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