Pharos Capital Group Accelerates SEC Exam Compliance with Insight
Hours saved in SEC exam response time
Side letter compliance response time reduced to 15 minutes total per fund
Side letters centralized in Insight per fund
Challenge: The need to streamline a manual, time-consuming compliance process
Pharos Capital Group, dual-headquartered in Dallas and Nashville, is a physician-founded private equity firm that invests in growing healthcare companies. Pharos seeks to generate impact by investing in mission-driven companies aimed at lowering costs, improving patient outcomes, and expanding access to care, especially in underserved regions.
Founded in 1998, Pharos traditionally relied on the Chief Compliance Officer (CCO) and senior management’s collective memory and manual efforts to stay on top of investor obligations. Kimberly Futrell, CCO and Chief Financial Officer at Pharos, explained that as the company expanded, this became a time- and labor-intensive process. For example, if her team needed to know who had co-investment rights, team members would discuss among themselves and then verify by examining side letters. This process often involved reviewing a physical compendium of 20-30 side letters at a time.
Solution: Insight’s Critical Role in Swift SEC Compliance
Once Futrell and the firm’s partners discovered Ontra’s Insight solution, they recognized its potential to reduce the valuable time spent on tedious work and were eager to implement it. Insight quickly became critical to the firm.
“The ability to address investor obligations so efficiently and in a comprehensive way is a time-saver and a valuable piece of our compliance function,” Futrell shared.
The real test for Insight came about a year after Pharos started working with Ontra. It was then that the AI-powered solution became a critical part of the company’s compliance strategy ahead of an upcoming SEC exam.
During the exam, the SEC asked Pharos to provide a list of side letters between any private fund managed by the advisor and any investor or beneficial owners. Futrell worked with the team at Ontra to procure the data she needed from the app in minutes. This is in stark contrast to the days or even weeks it would have taken in the past.
The funds that used Insight only took about 15 minutes each to download and review the data needed to demonstrate compliance before crafting a response to the SEC.
However, not all of Pharos’ funds were managed through Insight. Futrell and her colleagues spent about 10 hours on each fund that didn’t use Insight, resulting in an extra 2-3 days of pulling side letter provisions. Thanks to Insight, the firm’s time was spent reviewing data and crafting a response, as opposed to days manually searching for and collecting the needed data.
Although the SEC did not request additional proof of compliance with obligations, Futrell was confident that, thanks to Insight, the information was correct and accurately organized across funds. “It’s like insurance for my peace of mind because I want assurance that I’m performing my job and meeting my responsibilities to the best of my ability,” she explained.
When asked if Insight ultimately achieved the objectives set out for it, Futrell responded, “Yes! Top of the list was being able to confidently and quickly provide that list of side letter provisions to the SEC when asked for it. And that was exactly what Insight did.”