The International Organization of Securities Commissions’ Technical Committee has published a consultation paper that proposes principles to mitigate conflicts of interest in the private equity world, IOSCO said Tuesday.

The report examines the conflict of interest risks encountered at each stage of the life cycle of a typical private equity fund and sets out possible methods for mitigating these potential conflicts, usually by trying to align investor and manager interests through incentive structures, disclosure and legal agreements.

“Like other segments of the financial services industry, the manner in which private equity firms are structured has the potential to create conflicts of interest for their fund managers which, if not adequately addressed, have the potential to disadvantage investors,” says Kathleen Casey, chairman of the Technical Committee.

“These principles provide industry and regulators with principles by which to assess the quality of controls aimed at managing these potential conflicts, and are intended to be readily applicable to all private equity firms regardless of where they are organized or operating, their chosen investment strategy, fund structure or other investment business activities,” she adds.

The report, which was produced by a working group chaired by Dan Waters of the UK Financial Services Authority, is out for comment until February 1, 2010.

IE