The director of the Securities and Exchange Commission's Office of Compliance Inspections and Examinations, Drew Bowden, said Tuesday his examiners have found more than half of private equity firms have violations of fee laws or material controls.

Speaking to the Private Fund Compliance Forum in New York, Bowden said one of the most common violations is the hiring of so-called “Operating Partners” by the private equity businesses, but paid for by portfolio companies they run.

“Since these professionals are presented as full members of the advisor’s team, investors often do not realize that they are paying for them a la carte, in addition to the management fee and carried interest. The advisor is able to generate a significant marketing benefit by presenting high-profile and capable operators as part of its team, but it is the investors who are unknowingly footing the bill for these resources,” Bowden said.

This criticism was part of an overall attack in his speech on some private equity advisors for demanding portfolio companies they control to pay for the advisor’s bills, to reimburse expenses for managing their investment in the companies and to add to pay the cost of the advisor’s employees who manage the investment.   

In the nearly two years the SEC has been regulating this segment of the advisory industry, “we have seen that these temptations and conflicts are real and significant,” Bowden said.

The SEC exams chief complained most private equity firms don’t give their limited partnership investors enough information to monitor these investments -- “opaqueness when transparency is most needed.”

He also griped limited partnership agreements for the firms often let advisers to charge fees that are not reasonably contemplated by investors.

Bowden called the SEC’s initial exams of private equity firms “effective.” OCIE has examined 150 private equity advisors since it’s Dodd-Frank act mandate to oversee the industry began in 2012 and should meet its goal of reviewing 25 percent of the registered firms by the end of the year.