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Now a senior private-equity insider is trying to shine light on these little-known payments, which can constitute a sizable slug of revenue at the firms. The insider filed a whistle-blower complaint earlier this year with the Securities and Exchange Commission in which he contends that private-equity firms are violating federal securities law because they are acting as unlicensed brokers when they collect transaction fees.
“This is one of the most black-and-white examples of a securities violation that I can recall,” said the insider’s attorney, Jordan Thomas, who helped establish the SEC’s whistle-blower program and is now a partner at [prior firm]. “The widespread, systematic and flagrant nature of these violations is likely to be deeply troubling to the new, more aggressive SEC under Chairman Mary Jo White’s leadership.”