GPs shouldn’t rely on regulation rollback

Fund managers may be placing themselves at a disadvantage by pulling back their compliance efforts, an asset management compliance expert says.

Fund managers should “stay the course” with their compliance efforts so as not to put themselves at a disadvantage with regulation-savvy investors, according to one compliance expert.

“There’s been a lot of talk [about deregulation] but nothing has really changed yet,” Winston & Strawn partner Basil Godellas said during a compliance webinar hosted Wednesday by the Association for Corporate Growth. “As a matter of fact, I would not reduce or diminish any of the current policies and procedures.”

He added that if a firm finds a certain compliance practice needs to be enhanced to meet current requirements it should make the efforts to do so, because a Securities and Exchange Commission examiner could still come knocking.

While enforcement could move in either direction, depending on what is happening at the agency at a given time, the SEC will never disregard enforcement related to traditional investor protection issues, he said, adding the private funds space has changed from the institutional investors’ perspective.

“If you have investors who are institutional, or you are seeking to get to that next level to raise capital from institutional investors, the reality is you’re on a new playing field of having a private equity manager with robust [compliance] procedures,” Godellas said. “You can bet they’re still going to expect policies and procedures enforced and designed to look out for them and their interests in the fund.”