Silver’s CEO, Fizza Khan, and Compliance Manager, Tyler Schoenberg, recently provided commentary to FundFire about the SEC’s recent settlement with Insight Partners in an enforcement case alleging that the $79 billion venture capital and buyout manager charged excess fees to clients by failing to implement an adequate process to account for “impaired” portfolio companies across more than a dozen of its funds.
Commenting on whether a common challenge for private equity and venture capital managers is compliance with excess management fees, Fizza remarks, “[w]e see this as less of an issue of excess management fees and more of an issue of inaccurate or inadequate disclosures. Here, it was not so much that the fees Insight charged were high, it is that they were either in excess of what they should have been under the terms of the LPA [limited partnership agreement], or there were under-disclosures related to the criteria used to determine the ‘permanent impairment’ fee reduction.”
When asked what steps private equity and venture capital managers can take to ensure they are compliant, Tyler points out that the Insight case doesn’t break any new ground. “There is nothing new here,” he said. “But this highlights the importance of digging deep in those annual compliance reviews and paying close attention to fee and expense allocation in particular this year.”
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