Karpati to leave SEC for private sector

Bruce Karpati helped establish the SEC’s fledgling asset management division, which focuses on alternative investment strategies, in 2010. He oversaw around 60 cases during his tenure.

Bruce Karpati, the head of the US Securities and Exchange Commission’s asset management team that focuses on the private equity industry, among other things, is heading to the private sector. 

The SEC announced Karpati’s departure in a news release this week. Karpati will join Prudential Investments Monday as chief compliance officer, according to a statement from the company.

We want to understand…the incentives that exist for managers, and trends and risks that could enable us to more effectively spot or investigate fraud

Deputy chiefs Julie Riewe and Marshall Sprung will replace Karpati until the Commission puts in place new leadership, according to the statement.

The news comes just one week after it was revealed that Carlo di Florio, the agency's head examiner, stepped down to lead a new division of risk and strategy at the Financial Industry Regulatory Authority. 

Earlier this year Karpati addressed delegates at PEI’s CFOs and COOs Forum 2013 in New York, where he said recent examinations of newly SEC-registered private equity firms are helping regulators understand the complex world of private equity. 

“We want to understand the structure of the industry, the customs and practices, the incentives that exist for managers, and trends and risks that could enable us to more effectively spot or investigate fraud.”

He continued: “Also, we are much better able to take on cases that have a variety of complex and technical issues. You won’t see the Enforcement Division or the AMU shy away from cases that involve illiquid asset valuations or that require us to dig into the operations of a portfolio company.”

Bruce Karpati

Karpati became co-head of the asset management unit, along with Robert Kaplan, in 2010 when the team was formed. He was “instrumental” in establishing the team, according to the SEC, and a hallmark of his tenure was close coordination with other SEC divisions. Kaplan left the SEC last year to join Debevoise & Plimpton.

During his time at the SEC, Karpati oversaw around 60 cases, mostly involving hedge funds but also including enforcement action brought against Oppenheimer & Company, which was accused of inflating the value of one of its private equity funds while marketing a follow-on fund. Oppenheimer eventually settled with the SEC, paying $3 million as part of the arrangement. 

Karpati joined the SEC in 2000 as an enforcement staff attorney. He was promoted to branch chief in 2002 and assistant regional director in 2005. In 2007, Karpati founded the SEC’s hedge fund working group to combat securities fraud in the hedge fund industry. 

At Prudential, Karpati will work as chief compliance officer for the mutual fund manufacturing and distribution business of Prudential Financial, as well as performing chief compliance duties for the company’s mutual fund boards, Prudential said in a statement.