February 26, 2021

Private Equity: Will a Gensler-Led SEC “Send Them A Message”?

The WSJ recently reported on speculation that, under the leadership of Gary Gensler, the SEC may target PE sponsors for enforcement scrutiny. Here’s an excerpt:

Regulatory experts see a likelihood that if Mr. Gensler is confirmed by the Senate, the SEC could return to large, headline-making fines against private equity, which became less common under Jay Clayton, who led the agency from 2017 through 2020. Mr. Clayton last week said he would join the board of buyout firm Apollo Global Management Inc. as a lead independent director.

Mr. Gensler “got a lot done because he made a big splash” leading the CFTC, said Joe Weinstein, head of the securities and shareholder litigation practice at law firm and lobbying group Squire Patton Boggs. “I do think he’s going to try to send a message to whatever subset of the industry he is focusing on.”

During the Obama administration, the SEC brought big-ticket “message sending” cases against ponsors like The Blackstone Group and Apollo Global Management. In recent years, the SEC has not brought high-profile cases like these, but the article points out that the number of enforcement actions against PE sponsors actually ramped up during Jay Clayton’s tenure as SEC Chair.  The high water mark occurred in 2018, when the SEC brought 8 enforcement actions against private equity, twice the number that were brought by the agency in 2016.

John Jenkins