While buyout shops make plans to register with the federal government by next spring, the regulators may find themselves facing a “tall order” to write the rules for financial reform as the government struggles with its own financing, says Jennifer Lin, the new managing director of compliance at the boutique audit shop David Landau and Associates LLC.
“The rulemaking process itself is time-consuming. If you add a further layer that there is no funding to resource this initiative, I think the timeline is going to get dragged out even further,” said Lin, whose new practice area was launched in September.
Lin, who has more than 11 years of compliance experience in the securities industry, joined DLA in May to launch its compliance practice. She formerly worked for 4-1/2 years at Deutsche Bank, where she co-ran the compliance inspections group, covering broker dealer operations, asset management, and the bank itself. Before that, she worked for Macquarie Group, an Australian bank, where she started her career in compliance.
“The launch of our compliance practice is consistent with DLA’s founding vision,” DLA’s president, David Landau, said in the press release. “DLA strives to be at the forefront of responding to major regulatory events, such as Sarbanes-Oxley with our Internal Audit practice or Dodd-Frank with our Compliance offering.”
DLA, a boutique accounting firm, was founded in 2001 as an alternative to what was then the Big Six accounting firms. Its 55 professionals offer advisory services to private equity firms, hedge funds, REITs and other public and private real estate and financial service firms. DLA provides outsourced internal audit services for many of the largest alternative asset managers and public REITs.
Larger firms were more likely already to have registered as registered investment advisers, but smaller firms may not have laid the same foundation, Lin said. “This is probably a bigger challenge for them because they have to build a culture of compliance in the firm.”
Despite an effort by the private equity industry to roll back the registration requirement, Lin said she believes limited partners increasingly will want GPs to have compliance programs, even if they didn’t have to register.
“I think that has given investors into these funds reason, from a due diligence perspective, to look for [strong internal controls] anyway,” she said. “There is a shift. It is becoming an industry best practice to have systems and controls in place to demonstrate compliance to your investors.”