Since the Securities and Exchange Commission has recently taken an increasingly closer look at the activities of private equity and venture capital fund managers, it is more important than ever for fund managers to understand when conflicts of interest are likely to arise and how to manage them properly. The SEC has expressed concern about conflicts of interest inherent in the private equity business model and has brought several enforcement actions against private equity fund managers in the last couple of years that mostly focus on direct and indirect compensation to managers or advisers that were not properly disclosed to the fund’s investors. Since the SEC takes the position that fund managers and advisers owe a fiduciary duty of loyalty to act in the fund’s best interest, fund managers must keep a close eye on potential conflicts of interest and employ best practices like consulting advisory committees whenever possible conflicts arise. [Read more…]