Private Equity Has a Whistleblower Problem

Thomas says that he has no personal opinion on the appropriateness of transaction fees in general, but clearly believes that private equity firms have been violating securities laws by charging them without first registering as broker-dealers. And given how much money private equity firms are managing – not to mention those on the other sides of buyout deals – he believes greater oversight is appropriate.

“No one is really monitoring or examining what these funds are doing, often including their own investors,” Thomas explains. “If an investor thinks something is wrong, their only real way to get information is to file suit. And then they risk losing access to that fund, and others, in the future.”

For Jordan Thomas and his client, however, it comes down to a question of current law, which they see as black-and-white. “Private equity firms have all the hallmarks of being brokerdealers, but they haven’t been registering as broker-dealers,” Thomas says. “It’s really that simple.”

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