Controversy Over Fee Structure Could Rope Some Private Equity Firms into AML Compliance

By Brian Monroe

Ahead of expected anti-money laundering regulations for investment advisers, some private equity firms may find themselves subject to such oversight for a reason few would have guessed: their fee structures. In April, a U.S. Securities and Exchange Commission (SEC) official told attendees of an American Bar Association conference that transaction-based compensation structures employed by private fund managers could result in the regulator defining them as broker-dealers, a class of financial institution regulated under anti-money laundering (AML) laws. Concerns about compensation, which private equity firms earn for selling interests in funds or performing investment banking activities, arose in a complaint filed...