Valuation of investments may be focus of the US securities regulator’s inquiries
The New York Times reports that the US Securities and Exchange Commission’s enforcement unit has written to various, unnamed private equity firms:
“While the S.E.C. emphasized that the request should not be construed as an indication that it suspected any wrongdoing, its goal in gathering information was to investigate possible violations of securities laws, these people said.
One focus of the inquiry is how private equity firms value their investments and report performance. Unlike the valuing of publicly traded stocks, valuing private equity investments — largely in private companies that are not listed on an exchange — can be a thorny and subjective process.
The S.E.C.’s concern, say people familiar with the government inquiry, is that some private equity funds might overstate the value of their portfolios to attract investors for future funds.”
See also: Mitt Romney and private equity’s image problem
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