Equity fund consultants are often hired by firms when they buy a company, and begin to streamline the operations of the company. Very often, these consultants are also called operating partners. They're experts in their field, and they are typically paid by the company or its investors.
However, companies often list the names of the operating partners as full-time employees when they are trying to seek funds from investors. The Securities and Exchange Commission believes that these buyout firms are not being completely honest with investors about how these consultants are paid.
These operating partners typically help the company enhance performance after the buyout and in many cases, buyout firms use these consultants to attract investors to contribute to their funds. These consultants work for private equity funds that include endowments and pensions, and according to regulators, they may seem like employees, but are not paid by the firms.
A review of regulatory filings involving 80 such private-equity firms found that only approximately 50% of the firms made it clear to investors that the cost of hiring these consultants was paid by investors or the companies they controlled. The remaining half of the private equity firms did not mention the consultants at all, and did not inform investors how these people were paid.
The Securities Exchange Commission wants to ensure that private-equity firms are making clear to investors all the details of their compensation of these operating partners. The agency wants to make sure that investors in these private equity firms are completely aware of all the terms that they agree to.
Anyone can be charged with securities fraud. Corporate or business representatives investment brokers, and even ordinary company employees can face these serious charges. If you are currently facing charges of securities fraud or are being investigated for these crimes, speak with an Arizona white-collar criminal defense lawyer about your legal defense options.