“What is 20 times taller than the Statue of Liberty, 15 times longer than “Moby Dick” and would take the average reader more than a month to read, even if you hunkered down with it for 40 hours a week?” If you’ve been Dodd-Frank’ed, you know the answer. The last round of financial overhaul was [...]
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Pay for Performance from Future Fund Flows
Michael Weisbach Professor and Ralph W. Kurtz Chair in Finance at The Ohio State University, and his colleagues, Ji-Woong Chung, Berk A. Sensoy and Léa H. Stern, are looking a the effect of the pay for performance at private equity funds. One hand, there is the current income from management fees and a percentage of [...]
The SEC Wants to Know if You Are Systemically Important
The Securities and Exchange Commission proposed a new rule that would require advisers to private funds to report information for use by the Financial Stability Oversight Council in monitoring risk to the U.S. financial system. Sections 404 and 406 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires the SEC to gather this [...]
Proposed “New” Standard for Accredited Investor
If you are involved in the private placement of securities, then you have been waiting to hear how the SEC was going to change the definition of “accredited investor.” Section 413(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires the definitions of “accredited investor” to exclude the value of a person’s primary [...]
Pay to Play Rules for Placement Agents
The SEC imposed strict limitations on the ability of investment advisers to make political contributions when their clients include government bodies when it issued Rule 206(4)-5. They don’t want government investment decisions decided campaign contributions. This limitation also applies to private investment funds under the language of the rule and the changes to the Investment [...]
Regulation of Private Fund Advisers at the State Level
The Dodd-Frank Wall Street Reform and Consumer Protection Act raised the level for registration with the SEC and removed the commonly used exemption from registration used by private fund advisers. That means smaller traditional investment advisers will be kicked out of the SEC registration and into the state registration systems. That also means that advisers [...]
More Information on the Custody Rule
With the removal of the 15 client rule exemption from registration with the SEC, many private funds are going to have to comply the custody rule Rule 206(4)-2. Private equity firms will have the most problems trying to meets the demands of the rule. The SEC is trying to help. They updated the Staff Responses [...]
California’s New Placement Agent Law
California has become the latest state to regulate the use of placement agents who help investment managers secure government pension fund money. (Or is that placement agents who help government pension fund money find suitable investment managers?) California Assembly Bill 1743 was backed by the California Public Employees’ Retirement System, the state treasurer and the [...]
The Family Office Exemption under the Investment Advisers Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act wiped out the exemption enjoyed by most private funds. I’m still waiting to see how the SEC will define a “venture capital fund manager.” In the meantime, the SEC has published its proposed rule defining a “family office” and its exemption from registration under the Investment [...]
Revoking a Subscription Agreement
Private equity funds investors sign a subscription agreement, promising to deliver cash when the fund makes a capital call. In a recent Delaware case, investors sought to revoke their subscription agreements and recover their capital contribution. They were investors in a Lehman Brothers sponsored investment fund. In 2007 the three plaintiffs became limited partners in [...]
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