In a move that might affect the returns that clients of private equity funds make, the US Securities and Exchange Commission is trying to determine
whether some firms are taking more profits from investments than they should
under agreements with fund clients, according to Bloomberg.

The powerful US
financial regulator has been reviewing the industry since the Dodd-Frank
Act in 2010 was passed. It is examining how buyout funds ensure that payouts
follow the sequence set out in partnership documents, the news service said,
citing unnamed sources.

Regulators are looking for deviations from the distribution
process, or waterfall, which usually calls for clients to receive some gains on
investments before the fund manager, the report said.

The SEC declined to comment on the matter when contacted by WealthBriefing.

The watchdog SEC is also looking into how buyout firms
allocate expenses among investors, including those incurred for deals that are
pursued but not completed, the news service said. The SEC is concerned that
firms lack internal controls to track payments and ensure that the agreed
waterfall plan is followed, the report said.