Nicholas Elliott in the WSJ Risk and Compliance Journal notes:

When Blackstone Group private equity head Joseph Baratta said on Tuesday at the WSJ Pro Private Equity Analyst Conference that “the whole industry has become much more risk averse,” the comment pertained to regulation, not market volatility or geopolitical upheaval.

His remark came after a string of enforcement actions by the SEC, mostly concerning the charging of fees to the limited partners that invest in buyout and venture firms, and the disclosure of those fees.  Apollo Global Management, KKR & Co. and Blackstone itself are among the firms penalized by the SEC.

While the fines were relatively small, private equity investors seem concerned about the impact on their reputations, and that concern extends to the limited partners - the investors. Stephen Whatmore, principal at Australian limited partnership QIC and a speaker at the conference, said “It’s hard as an LP to have to go back to our [chief investment officers] and our trustees and boards and yet again explain another infraction in the industry.”

With such reputation issues in mind, as well as the underlying desire for fair and transparent fee allocations, LPs are looking to the SEC for support. Several LPs at the conference said they were pleased with the progress made by the firms in which they invest, but Michael Elio of the Stepstone Group suggested the SEC look to “establish a floor of conduct” in the private equity industry. “Conduct” is a popular target for regulators around the world but a broader issue than fee disclosure and one that’s led banks to adopt additional compliance measures and metrics.