IOSCO analyses the conflict of interest risks encountered through the life cycle of a private equity fund which is managed by a multi-fund. The conflicts were identified by an IOSCO working group formed of industry participants and regulators.
The International Organization of Securities Commissions' (IOSCO) Technical Committee has published a Consultation Report on Private Equity Conflicts of Interest. The Report proposes a number of Principles for the effective mitigation of the potential conflicts of interest encountered in private equity firms, and the risks these conflicts pose to fund investors or the efficient functioning of the market.
The scope of the report is limited to the risks posed to fund investors or the efficient functioning of financial markets from conflicts of interest which may exist within a private equity firm or within a private equity fund, particularly the potential conflicts of interest that may be faced by the manager of a private equity fund. It generally does not address potential conflicts of interest which are not particular to private equity business, any apparent conflict related to business tensions, or those conflicts which are not within the typical mandate of securities regulators, for example any issues arising from obligations owed by the director appointed by a fund to a portfolio company.
The report sets out the conflict of interest risks encountered through the life cycle of a typical private equity fund which is managed by a multi-fund, multi-strategy firm, as identified by an IOSCO working group formed of industry participants and members of the regulatory community. Potential and common methods for mitigating these potential conflicts of interest are set out alongside the respective risks. Mitigation typically takes the form of appropriate alignment of interest through incentive structures, disclosure and legal agreements.
Finally, based on the appropriate mitigating measures identified by the working group, this report outlines a set of principles for the management of conflicts of interest in private equity. These principles are intended to be readily applicable to all private equity firms regardless of where they are organised or operating, their chosen investment strategy (ies), fund structure or other investment business activities. However, IOSCO recognises that private equity firms vary considerably in their size, structure and complexity, and this may impact on the applicability of one or more of these principles to a specific firm’s business.
© IOSCO
Documents associated with this article
|
|
IOSCOPD309.pdf
|
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article