The Securities and Exchange Commission (SEC) announced that it filed 784 total enforcement actions in fiscal year 2023, a three percent increase over fiscal year 2022, including 501 original, or “stand-alone,” enforcement actions, an eight percent increase over the prior fiscal year. The SEC also filed 162 “follow-on” administrative proceedings seeking to bar or suspend individuals from certain functions in the securities markets based on criminal convictions, civil injunctions, or other orders and 121 actions against issuers who were allegedly delinquent in making required filings with the SEC.  This includes enforcement against private equity (PE) firms and their portfolio companies as well as advisors and associated partners.

State of Play in the Private Equity Space

In conversations with PE sponsors, portfolio companies, and law firms, a consistent theme has emerged that investment activity is picking up but not by any means all the way back. For many PE firms 2021 and early 2022, were quite strong in terms of new capital raised. Many funds were formed, and investment strategies were put into place.  This, however, started to tail off in the second half of 2022 and all but came to a stop in 2023. Interest rates, high company valuations and a multitude of geopolitical issues, also, remain a challenge for investors. This has led to accumulating capital (“dry powder”) that needs to be put to work and we’re starting to see that in action.

The challenging market environment has also forced many investment firms to look beyond their “usual” target company profiles both in terms of the types of businesses as well as the geographies where they are located. This new, adjusted approach by PE firms emphasize the need for a consistent due diligence process and approach to evaluating target companies and their management – in large part to avoid facing any type of enforcement action, as mentioned above.

Once these investments are made some PE firms opt to take a more hands-on approach when it comes to the running and management of the business. Regardless of the approach, with the heightened scrutiny from regulators in the US and abroad, experts agree there is an increased obligation for portfolio companies to take a proactive stance when it comes to risk management and governance.


How IntegrityRisk Supports Portfolio Companies

Executive Background Checks

The first, and probably most common area of support provided to PE-backed companies is via executive-level background checks where it is vital to properly assess the reputation of any executive management new hires. It is these senior level hire assignments which necessitate a more thorough look into not only the individual’s legal and regulatory history but also to focus on past corporate affiliations where senior level positions were held as well as to properly address one’s social media profile/presence. When it comes to social media, this tends to include not simply the platforms they belong to, but also what the prospective executive is saying or expressing (including “sentiment” review) as well as a review of what others are saying about them and their affiliated businesses.

Due Diligence Research and Investigation

Another regular service that IntegrityRisk provides to sophisticated investors involves joint venture and/or mergers and acquisitions due diligence research and investigation. Not surprisingly, portfolio companies grow fast often via a “buy and build” approach. Having PE financial backing supports this strategy and, when doing so, appropriate due diligence on the target entity and its top executives is crucial to avoid assuming any unknown risks. Proper time and attention should be paid to this endeavor as “inherited risks” are a regular source of regulatory investigations and enforcement actions.

Supply Chain, HRDD, and ESG

Finally, a more recent and growing need for attention by investors’ concerns supply chain risks. This has become an increasing point of focus for regulators, particularly in relation to ongoing and historical issues involving bribery or corruption, but most recently human rights and ESG-related violations. A best practice approach to mitigating risks in the supply chain – especially with those that are complex with thousands of entities – requires implementation of a risk-based approach to the assessment of the company’s suppliers and third parties as well as to placing a strong focus on ensuring technology solutions are a part of the process. When it comes to ESG, not only is the investor seeking to mitigate risk, but also helping to create value for the portfolio company.

According to a survey conducted in 2023 by PricewaterhouseCoopers (PwC)  “One-third of PE respondents say that ESG was a primary driver of value creation in more than half of their organizations’ recent deals.”


To provide additional insight, we would like to reshare a blog we posted previously. Many of the themes we touched on are still relevant and reflect closely what we mentioned above. It is, however, important to note that the private equity market is fluid and can evolve quickly. We will continue to monitor and provide updates as and when appropriate.

Check our prior post on this topic: