The final installment in a six-part series, Outten & Golden’s Whistleblower & Retaliation Practice
examines the securities violations at the center of the SEC’s current enforcement agenda.

In April 2026, David Woodcock took the helm as Director of Enforcement at the Securities and Exchange Commission. In his first public remarks, Director Woodcock outlined a traditional enforcement agenda centered on high-impact cases involving six key areas: Offering Fraud, Accounting and Disclosure Fraud, Market Manipulation, Insider Trading, Private Funds, and Cross-Border Fraud.

This installment examines private funds, an area the Commission has scrutinized for years but one that has taken on new significance as private markets have expanded and more investor capital has moved outside traditional public markets. While private funds historically operated with less regulatory scrutiny than public markets, as more institutional investors, pension funds, endowments, and high-net-worth individuals allocate capital to private markets, the Commission has heightened its focus on whether private fund advisers are providing accurate disclosures, properly managing conflicts of interest, and acting in the best interests of investors.

What Are Private Funds?

Private funds are investment vehicles that pool capital from investors and are managed by investment advisers who make investment decisions on behalf of the fund. Unlike mutual funds and exchange-traded funds, which are generally available to retail investors and subject to extensive regulation under the Investment Company Act of 1940, private funds are typically offered only to certain qualified investors and are exempt from many of those requirements.

Private funds encompass several investment strategies, each with different risk profiles and regulatory considerations, including:

• Private equity funds invest in privately held companies with the goal of improving operations and ultimately selling those investments for a profit;
• Hedge funds use a variety of investment strategies, including long and short positions, derivatives, and other complex financial instruments;
• Venture capital funds invest in early-stage companies with high growth potential; and,
• Private credit funds provide loans and other forms of financing outside traditional banking channels.

The growth of private funds has reshaped capital markets. Private equity, venture capital, hedge funds, and private credit managers now oversee trillions of dollars in assets and play an increasingly significant role in financing companies, restructuring businesses, and generating returns for institutional investors.

Why Are Private Funds an SEC Enforcement Priority?

Although the SEC’s enforcement priorities have changed with new leadership, private fund advisers remain an area of scrutiny, particularly where investor disclosures, conflicts of interest, and fiduciary obligations are implicated.

Enforcement interest centers on several core (and recurring) issues:

• Fee and expense practices – how management fees, deal-related expenses, and fee offsets are calculated and whether they align with governing fund documents;
• Undisclosed conflicts of interest – where adviser interests are placed ahead of investors, or where preferential treatment is given to certain investors;
• Asset valuation – whether fund managers accurately and fairly value illiquid assets, particularly within the fast-growing and increasingly stressed private credit space; and,
• Liquidity and marketing – how firms handle redemption requests and whether they comply with rules for advertising fund performance.

Conflicts of interest remain at the center of many private fund enforcement actions. Advisers frequently occupy positions where their interests may diverge from those of investors — whether through fee arrangements, affiliated transactions, portfolio company relationships, or decisions involving multiple funds. The SEC has repeatedly emphasized that investors cannot evaluate these arrangements unless conflicts are disclosed clearly and completely.

Fee and expense practices have also remained a recurring enforcement theme. The Commission has brought cases involving allegations that advisers improperly allocated expenses, failed to disclose certain compensation arrangements, or structured fees in ways that benefited the adviser without adequate investor disclosure.

Because private fund investments often do not have readily available market prices, advisers may have significant discretion in determining the value of portfolio assets. The SEC carefully watches valuation practices because inaccurate valuations can affect reported performance, management fees, and investor decisions.

In recent months, the Enforcement Division has zeroed in on continuation vehicles, a tool that allows private equity fund managers to transfer assets from an old fund into a new one. This allows the manager to retain control of promising assets while giving original investors the option to cash out or roll their investment. In this area, authorities want to ensure conflicts of interest are disclosed when transferring assets into new vehicles where the manager acts on both sides of the deal.

Private credit has emerged as one of the most significant growth areas within private markets — and an area attracting increased regulatory attention. Unlike traditional bank lending, private credit funds provide financing directly to companies, often involving complex structures and limited publicly available information. That lack of transparency has raised questions about valuation practices, underwriting standards, and whether investors have sufficient insight into the risks embedded in these portfolios. As market participants worry the trillion-dollar market sits on a precipice, SEC Chairman Atkins is more measured, asserting “opacity in this space can be an issue…valuation, transparency, and credit quality are key.”

SEE OUR RECENT ARTICLE:  THE RISE OF THE PRIVATE CREDIT MARKET AND THE RISKS INHERENT IN ITS EXPANSION

The Role of Whistleblowers in Private Fund Enforcement

Private fund misconduct can be difficult for regulators and investors to detect because many investment decisions, valuations, and conflicts occur behind closed doors. Employees working in investment management, compliance, finance, valuation, and operations are often uniquely positioned to identify problems before they become public. Insiders can spot lapses in due diligence, secret side deals and, in private credit, early redemption rights.

The SEC Whistleblower Program provides robust incentives for individuals who report potential securities violations that lead to successful enforcement actions. Individuals who provide information leading to a successful SEC enforcement action may be eligible for awards ranging from 10% to 30% of monetary sanctions collected by the Commission. The program also allows whistleblowers to submit tips anonymously through counsel and provides protections against retaliation.