The SEC Coverup for Private Equity: Worse Than for TBTF Banks

Posted on September 25, 2014 by Yves Smith

In a mere four months, the SEC has gone from calling out widespread abuses in the private equity industry to not just walking back its detailed criticisms, but actually enabling a coverup.

Readers may recall that in May, SEC inspection chief Andrew Bowden gave what was by regulatory standards a blistering speech describing widespread misconduct in the private equity industry. His detailed account followed SEC Chairman Mary Jo White setting forth uncharacteristically clear-cut details of private equity abuses in testimony to Congress.

Bowden was specific about the extent of the abuses by general partners, which included what amounts to theft, as in taking funds they weren’t entitled to. Bowden categorically stated that the bad acts implicated over half the firms they’d examined. Moreover, he described in considerable detail the types of grifting they’d found so far. Privately, the SEC has made clear that the abuses weren’t concentrated at small fry but were across the spectrum of firms, including the very top players.