The U.S. Securities and Exchange Commission is seeking to determine whether some private-equity firms are taking more profits from investments than they should under agreements with fund clients, Bloomberg News reported today. The SEC, pursuing a review of the industry begun after passage of the Dodd-Frank Act in 2010, is examining how buyout funds ensure that payouts follow the sequence set out in partnership documents. Regulators are looking for deviations from the distribution process, which usually calls for clients to receive some gains on investments before the fund manager. The SEC has implemented examinations to police the industry. In connection with regular inspections, the SEC is also looking into how buyout firms allocate expenses among investors, including those incurred for deals that are pursued but not completed.
