No move is made in the private equity (PE) industry without everyone involved first stepping back and gauging standard market practices. The same applies when PE sponsors are deciding whether and how to disclose the existence or outcome of SEC exams to current or potential investors. While the market standard matters in this context, it is also important for sponsors to consider the various factors that could tip the scales toward requiring disclosure in certain circumstances. This first article in a three-part series describes the five most common sources of a fund manager’s potential obligation to disclose the existence or outcome of regulatory examinations or similar events. The second article
will detail the three different types of SEC examinations to which fund managers may be subjected, as well as the corresponding disclosure requirements they may trigger. The final article
will discuss the circumstances that require disclosure of a deficiency letter, as well as best practices surrounding the mechanics of disclosure. See our two-part series on SEC examination topic trends: “Outside Business Activity Disclosure, Subscription Credit Facility Use and Cybersecurity Policies
” (Mar. 19, 2019); and “Minority Stake Transactions, Co‑Invest Conflicts and Other Concerns
” (Mar. 26, 2019).