The SEC and CFTC use bounty actions to identify fraud and other illegal conduct in the financial markets. More specifically, both agencies regulate private equity firms, companies, and transactions through bounty and enforcement actions. Further, both agencies use private equity bounty actions to identify significant fraud and illegal conduct in the dealings of private companies and their executives.
The SEC Regulates Private Companies
SEC representatives clearly state that “being a private company comes with serious obligations to investors and the markets.” Further, the agency monitors private companies in respect to their reporting to actual and potential investors.
The SEC also enforces securities and investment fraud schemes committed by individuals and private companies. These enforcement actions fine and punish private companies for disclosure violations, fraud, and other illegal conduct.
The SEC Regulates Private Investment Advisers and Private Equity Funds
Traditionally, the SEC left most private equity advisers and transactions alone. From 1940 to 2010, the private adviser exemption allowed most private equity advisers and transactions unregulated. However, in 2010 The Dodd-Frank Act erased the private adviser exemption. Thus, Dodd-Frank requires all private equity firms with more than $150 million in assets to register with the SEC in the category of “Investment Advisers.”
More specifically, the SEC regulates investment advisers and private equity funds through the Advisers Act. This Act requires all non-exempt private equity fund investment advisers to register with the SEC. Further, the SEC requires these investment advisers to comply with securities laws and disclosure requirements. More specifically, the SEC requires these private equity funds to report information to the SEC. More specifically, depending on the investment adviser and equity fund, the SEC requires specific disclosures. Failure to make these disclosure or making false disclosures can be the basis of enforcement and bounty actions.
Fraudulent Assets Under Management Determinations and Disclosures
Assets under management (AUM) is the total market value of the investments that a person or entity manages on behalf of clients. Assets under management definitions and formulas vary by company. That being said, fraudulent determinations and disclosures regarding AUM can trigger regulatory and enforcement actions.