SEC names heads of alternatives investigation unit

Now when private equity firms are cooperating with SEC investigations, they'll be working with SEC veterans Bruce Karpati and Robert B. Kaplan. 

The Securities and Exchange Commission has named the two SEC veterans co-chiefs of a new investigative unit to focus on alternative asset managers, including private equity firms. The creation of the unit is intended to increase the SEC’s expertise on alternative investment asset classes, and help the commission to better monitor investment advisors, investment companies, hedge funds, and private equity funds. 

Members of the specialised units will acquire the investigative insights that can only be developed by conducting multiple investigations in the same subject area. Robert Khuzami

For private equity GPs, who often complain that some SEC auditors don’t understand enough about how private equity is different from other types of investment advisors, the new units could make working with the SEC easier. 

 

The SEC is seeking to be “as savvy as those we are investigating”, and that establishing these specialised units will facilitate that effort, said Robert Khuzami, director of the enforcement division, at a recent accounting conference.

“Members of the specialised units will acquire the investigative insights that can only be developed by conducting multiple investigations in the same subject area, which will lead to more effective, efficient investigations,” Khuzami said.  

 

Karpati founded and led the commission’s hedge fund working group, and was assistant regional director for the SEC’s New York regional office. Earlier, he was a branch chief and attorney in the Division of Enforcement at the agency. Before, Karpati was an associate at law firm Dechert in Washington, DC. 

Kaplan was assistant director at the division of enforcement. Earlier, he held positions as assistant chief litigation counsel and senior counsel/staff attorney in the division. He began his career as an associate with Morgan, Lewis & Bockius in New York.

The alternatives unit is just one of five new units that will focus on “high priority” enforcement areas.The Division also has created a new Office of Market Intelligence that is responsible for the collection, analysis, and monitoring of the “hundreds of thousands of tips, complaints, and referrals that the SEC receives each year”.

Private equity has experienced several scandals in the past year, including a wide-ranging public pension pay-to-play scandal that saw some pension officials in New York allegedly strong-arming investment firms for kick-backs in exchange for commitments from the pension. The scandal investigation has since spread to other states like California and New Mexico.

The SEC is involved in the investigation along with the attorney general of New York.