The top five compliance challenges your private equity firm will face in 2023

2022 saw the Securities and Exchange Commission’s (SEC) achieve a record fiscal year all while proposing and finalizing several new regulations, many of which impacted the private equity and private fund industry.

As the compliance leader at your private equity firm, venture capital, fund of funds or real estate fund, you likely are facing increased pressure both from leaders at your firm and from limited partners and investors. And if your private equity firm is like most, your goal is to be on a trajectory of continued growth, which means increasing investor confidence in your firm and its practices.

To ensure your firm’s success, your compliance team will have to address a number of compliance challenges. We’ve gathered the top five compliance challenges your private equity firm might encounter in 2023.

Core compliance challenges for private equity firms in 2023

While no one can predict the future, we believe these challenges could have a lasting impact on your private equity firm if not addressed.

  1. Building a culture of compliance.

A culture of compliance must come from the top. The most powerful compliance culture tool at your firm is senior management. In the past, compliance teams sometimes struggled to educate other members of their firm on the importance of compliance. 2023 will be no different and as such, your firm must prioritize firm-wide edification and training, leaving no risk point open for potential issue.

  • Knowing what regulations apply to your firm.

2022 was, if nothing else, an active year for regulatory activity. With record-breaking penalties sought by the SEC and a number of new regulations introduced, compliance programs had their work cut out for them. Truth be told, it doesn’t look like the pace of activity will be slowing down any time soon. This year, compliance teams will have to quickly determine what regulations apply to their private equity firms and quickly adapt them into their compliance programs to ensure compliance.

  • Navigating upcoming examinations.

Regulators have made it clear; examinations are coming. With pointed risk alerts, the SEC has set the stage for targeted examinations in 2023. What’s the challenge? Well, not all firms have a clear understanding of how to implement these new rules or updated amendments, making compliance a difficult task for even the most thorough of compliance teams.

  • Making cybersecurity a top priority.

Regulators are aware cyber-attacks are becoming increasingly sophisticated, and many have made cybersecurity a top priority for 2023, which means cybersecurity has to be a top priority at your firm, too.

The damage a cyber-attack can do to your private equity firm and your clients can be detrimental. This means your firm will have to do its due diligence in implementing protective measures, including thoroughly training its staff, to mitigate cybersecurity risk.

  • Finding the right compliance solution.

New regulations and compliance risks place new demands on your firm’s compliance program. As you may know, these demands are especially challenging to meet at a private equity firm, because of the small headcount and often limited resources. Many firms are implementing compliance solutions to help them manage their compliance responsibilities. If your private equity firm decides to do the same, selecting the right resources is especially crucial!

From consulting to education to technology, your firm has several options to help fill the gaps in its compliance program. However, selecting the right vendor should not be taken lightly. Finding the right compliance solution can either enhance your firm’s compliance program or create bigger headaches in the long run.

2022 was a year for the books, and 2023 is sure to be no different. Is your private equity firm ready to take on these core compliance challenges? Schedule a demo today!