The recent efforts of the U.S. Securities and Exchange Commission to regulate the private equity industry are causing concern and dismay in the middle market. Armed with broad authority to police private funds through the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC has been conducting “presence exams” of newly-registered investment advisers, including private equity firms and hedge funds. SEC chair Mary Jo White doesn’t like what she’s seen so far.

“Some of the common deficiencies from the examinations of these advisers that the staff has identified included: misallocating fees and expenses; charging improper fees to portfolio companies or the funds they manage; disclosing fee monitoring inadequately; and using bogus service providers to charge false fees in order to kick back part of the fee to the adviser,” White said in testimony before the U.S. House of Representatives.

White’s scathing comments, and her pledge to increase the number of investigators looking into PE firms, sent shock waves through the Association for Corporate Growth’s annual InterGrowth conference.

“What we’ve learned is that there is almost zero knowledge inside the Beltway about what goes on in what is one of the most entrepreneurial capital markets in the world,” lamented ACG vice chair Doug Tatum in an interview with Mergers & Acquisitions at the conference. (For a video interview with Tatum, click here.)

Over the last few years, the ACG has spent a lot of time on Capitol Hill, championing the PE industry’s cause. In 2013, the ACG registered as a federal lobbying entity under the Lobbying Disclosure Act.

“On behalf of our members, we are actively defending what they do on a day-to-day basis inside Washington to a regulator who, I believe, is making great strides in understanding what we do, but started from scratch,” said Tatum.

Regulators are zoning in on a few topics, including expense allocations at the portfolio level and adherence to the fee structures outlined in private placement memos, explained Don Lipari, managing director of PE services for McGladrey. (For more, see the video interview with Lipari below, or click here.)

Documenting everything thoroughly is the best strategy for surviving in this new era of regulation, advised Lipari.

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Corrected May 7, 2014 at 2:17PM: 3527203344001