The US Securities and Exchange Commission’s (SEC) top private equity critic is leaving the agency for a job in the private sector.
Andrew Bowden, who has been director of the SEC’s Office of Compliance Inspections and Examinations (OCIE) since June 2013, will exit the agency at the end of April.
“We have identified what we believe are violations of law or material weaknesses in controls over 50% of the time.” —Andrew Bowden
While the compliance chief generally oversaw routine examinations of brokerages, asset managers, and financial firms, he made headlines last year with his investigations into private equity funds and their handling of fees and expenses.
“When we examined how fees and expenses are handled by advisers to private equity funds, we have identified what we believe are violations of law or material weaknesses in controls over 50% of the time,” Bowden said in May 2014.
Of various risks and temptations in the $3.5 trillion industry, Bowden pointed out “an enormous grey area” of fees and expenses.
“Many limited partnership agreements are broad in their characterization of the types of fees and expenses that can be charged to portfolio companies,” he said. “Poor disclosure in this area is a frequent source of exam findings.”
In the same speech, Bowden also emphasized serious compliance shortfalls—the likes of lack of due diligence and transparency—after an investor closes an investment. Limited partners are often left in the dark, he continued, largely due to the opaqueness of partnership agreements.
Bowden’s statements and the SEC’s continued probe prompted some large buyout firms including KKR to refund fees. Certain pension funds have come forward since the refund to voice concerns with KKR’s transparency, particularly in the way the fee credit came to light.
According to a person familiar with the matter, the SEC and OCIE will continue to thoroughly investigate private equity funds’ transparency and fee structures after Bowden leaves.
However, despite his critiques of the private equity industry, Bowden said it is the “greatest business you could possibly be in” at a panel hosted by Stanford University in March. He even joked he would recommend his teenage son work in private equity.
The agency has yet to announce an official search to fill Bowden’s position or an interim director, the source said.
The SEC did not say where Bowden is headed. Prior to his position at the commission, he spent 17 years at Legg Mason Capital Management as chief operating officer, general counsel, and executive director. Bowden received a JD from the University of Pennsylvania Law School and a bachelor of arts from Loyola College in Maryland.
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