Under Chairwoman Mary Jo White as well as enforcement specialists Drew Bowden and Norm Champ, the SEC is bearing down on fee transparency, including payments by portfolio companies to sponsors that may not be adequately disclosed, Cipperman said.
Potential conflicts of interest in affiliate transactions and co-investment terms qualify as hot buttons, along with how GPs present their fund performance, he noted. Meanwhile, LPs are applying the same due diligence to alternative asset managers as they’ve done with traditional money management shops.
“There’s been a lot of pressure to build your compliance program,” Cipperman said. “It’s a hot topic.”
Cipperman offers a full compliance program for private equity firms, up to and including chief compliance officers from his firm.
“Rather than building it yourself, you can immediately leverage our team of 20 people who have been doing this their entire careers,” he said. “It’s a cost you didn’t really have before Dodd-Frank. We can do it better, cheaper and faster than trying to bring someone in-house.”
Cipperman kicked off as a law firm with a small regulatory arm in 2004. By 2005, the Wayne, Penn.-based firm’s clients started asking for more help on compliance. In 2008, the firm introduced a fixed-fee model, including an outsourced compliance officer. Today about 95 percent of the firm’s billings come from fixed-fee compliance work.
“We don’t charge consulting fees,” Cipperman said. “It’s a monthly, fixed fee, which we find to be attractive to private equity managers. We try to avoid surprises.”
By Steve Gelsi