CHAPTER 9Compliance Training, Surveillance, and Testing for Private Equity Firms

9.1 INTRODUCTION TO PRIVATE EQUITY TRAINING, SURVEILLANCE, AND TESTING

In previous chapters we introduced the key concepts related to the creation, documentation, and implementation of a private equity compliance program. Once a compliance program is up and running, however, this is not where a general partner's (GP's) compliance obligations end. The next stage in compliance management relates to ongoing compliance obligations in order to maintain and improve upon the existing compliance function. There are three main components to this ongoing compliance management: training, surveillance, and testing (TST), collectively referred to as compliance TST. We now proceed to discuss each aspect of TST in more detail.

9.2 GROWTH OF TST

In the early days of the private equity industry the rigor of the overall compliance function was relatively weak as compared to today. As compliance obligations of GPs as well as the oversight of private equity compliance–related duties by regulators and investors have steadily increased, so have the resources dedicated by GPs to compliance similarly increased. With this broader compliance increase has come an accompanying focus on compliance TST.

In regard to training specifically, as compliance has become more complex and GP compliance policies have become more rigorous, more resources have been devoted by GPs toward not only explaining compliance policies to employees ...

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