In a move that might affect the returns that clients of private equity funds make, the US Securities and Exchange Commission is trying to determine whether some firms are taking more profits from investments than they should under agreements with fund clients, according to Bloomberg.

The powerful US financial regulator has been reviewing the industry since the Dodd-Frank Act in 2010 was passed. It is examining how buyout funds ensure that payouts follow the sequence set out in partnership documents, the news service said, citing unnamed sources.

Regulators are looking for deviations from the distribution process, or waterfall, which usually calls for clients to receive some gains on investments before the fund manager, the report said.

The SEC declined to comment on the matter when contacted by Family Wealth Report.

The watchdog SEC is also reported to be looking into how buyout firms allocate expenses among investors, including those incurred for deals that are pursued but not completed. The SEC is concerned that firms lack internal controls to track payments and ensure that the agreed waterfall plan is followed, the report said.