- Wilson worked as an SEC inspector from 2003 to 2006
- Now in regulatory compliance for private investment managers
- Says SEC focuses on conflicts of interest, cybersecurity
Fresh out of college, finance degree in hand, Luke Wilson went to work for the SEC in Chicago. It was 2003, and though Wilson hadn’t planned to work in government, “I saw it as an opportunity to get a broader view of the financial services industry … to see these companies from the inside, without just going to work for one of them.”
Hired as part of an outstanding scholars program, Wilson trained as an inspector conducting compliance exams. “It was great, a great group of professionals there, and just really interesting work,” Wilson said. “We got to see a wide variety of registered investment advisers.”
Wilson’s “prior life”at the SEC did not leave him with a jaundiced view of the industry. “The vast majority of firms out there [want] to do the right thing and they’re striving to be fully compliant,” he said. “And then there are the handful of firms for which the rules were written because maybe they don’t have the same mindset.” Wilson wouldn’t give details about the bad apples he encountered, saying only, “Some of those guys were characters.”
In 2006 Wilson joined ACA Compliance Group in Austin. The provider of tech and consulting services has “all shapes, sizes, flavors, colors of asset-management clients,” he said. “I spend most of my time with private equity funds and other types of commitment-based asset managers: real estate, private debt, energy, infrastructure and venture.” Within PE Wilson works with “everything from some of the bigger household names to some startups and folks just raising their first funds, and everyone in between.”
About the switch to the private sector, he says, “the one thing I really enjoy in particular, when we arrive onsite to visit our clients, they’re happy to see us — which is not necessarily the case with the SEC — because we’re there to help. We’re viewed as valued business partners.”
Wilson conducts “on-the-ground compliance reviews”: examining books and records, interviewing key employees and performing forensic testing. “[We’re] proactively going in and helping them identify previously unidentified risks or conflicts of interest or other compliance deficiencies.”
The SEC has always focused on conflicts of interest and “continues to look for and poke at potential” examples. “They’re also looking at just relationships and affiliation and connectivity and any conflicts that might arise.” If a firm needs financing, how does it choose the source — does it turn to an LP or an affiliate of an LP? If so, did it consider the potential conflict, and on what basis was the selection made?
Also scrutinized are revenue streams, “the fees that flow from portfolio companies and funds to the firm” and any expenses for which managers get reimbursed. “Did we disclose those expenses to our LPs, and is everything legitimate and not lavish or excessive?” Cybersecurity is another concern, and a growing practice for ACA, which provides due diligence of portfolio companies’ IT infrastructure.
“We’re always finding things that are interesting,” Wilson said, “or at least would be interesting to a regulator, potentially.”
Luke Wilson, partner and PE practice leader, ACA Compliance. Photo courtesy of the firm.