These are my notes from the Private Fund Compliance Forum 2013. They are live from the forum, so please excuse my typos.
James V. Gaven, Senior Compliance Counsel,Welsh, Carson, Anderson & Stowe
Alan K. Halfenger, Chief Compliance Officer, Bain Capital LLC
Greg Pusch, SVP, Director of Global Regulatory Compliance & CCO, HarbourVest Partners, LLC
The US loaded up funds with the new regulatory framework imposed by Dodd-Frank. Foreign jurisdictions have also imposed tough new regulations.
There is a July deadline for dealing with the AIFMD in the EU that imposes restrictions on private placements.
EU is a mess. The regulations are not in place, so you can’t register yet and don’t know exactly what you need to do to register. It’s going to be a county by country analysis, requiring county by country registration.
You will also need to specifically address how advice is given and where the investment decisions are being made. You need to focus on the granting of discretionary decision making.
It’s not just the EU, other countries have restrictions on marketing within the country to investors in the country.
The EU AIFMD comes into full force in 2018. There is a political overlay that may affect things. There is a lot of uncertainty. The UK has not created the application form yet to apply for private placement clearance.
Know Your Customer and AML procedures become important when marketing to overseas investors. You don’t want “bad guys” as investors. Foreign investors will be a red flag for examiners. It’s okay to use a risk-based approach to investor diligence. The standard is disclosure of significant ownership, ranging from 10% to 25% of the ownership.
The Middle East is a problem. Their regulations make it very difficult to market in Saudi Arabia. Korea has some tough regulations affecting private fund marketing.
You need to be concerned about placement agents from the perspective of FCPA and supervision. You need to audit periodically about any changes they are making to the marketing materials.
There is some thought about setting up parallel funds for EU investors. However, the EU regs tie back to the main fund and still requires registration.