In a move likely to be at least partially welcomed by advocates of private funds and those that advise them, the SEC on September 18 proposed to widen the definition of who qualifies as an “accredited investor.” Under the proposed new definition, while wealth would continue as a factor, professional knowledge, experience or certifications would also count.
Failure to disclose compensation is one of those violations almost guaranteed to draw an SEC enforcement action. The agency sees a large part of its mission as protecting investors, so when it suspects that an advisory firm has not been upfront in disclosing what and how it will get paid from clients, expect them to […]
Mutual fund managers are not the only advisers subject to allegations that they placed clients in more expensive share classes when lower-priced share classes for the same investments were available. An adviser making private fund investments found this out the hard way earlier this month when it settled charges that it failed to disclose conflicts […]
Hedge funds or private equity funds organized and offered by banking entities and affiliated advisers in certain foreign countries may not, under current law, be allowed to share the same name or even a variation of the same name with that bank or adviser. This may cause a problem, because countries like China or Taiwan have local regulations that may require the use of the same name. Some in the industry are asking for relief to deal with this issue.
Private equity advisers need to be careful before signing agreements with group purchasing organizations (GPOs). Those agreements may contain conflict-of-interest traps that amount to a breach of fiduciary duty and that should be avoided at all costs.
A private fund manager that the SEC accused of not acting in a timely fashion on multiple examination findings was taken to federal court by the agency, which charged him with, among other things, engaging in conflicted transactions and misleading investors. The manager, Louis Mohlman, Jr. and his two advisory firms reached a settlement with the SEC the same day.
The SEC is long past the day of being unfamiliar with private fund advisers. It knows what to look for when it investigates and isnt shy about enforcement actions. When it finds a situation where the owner of the advisory firm is also the chief compliance officer, dont be surprised if it makes an example of the case.
Private fund advisers specializing in real estate transactions need to beware. Steer clear of conflicts of interest when selling property from one client fund to another. Disclosure must be your watchword and favoritism cannot be shown to either fund, regardless of your firms percentage of ownership in each.
If your private funds offering documents state that your fund will invest only in real estate, be aware that those are not just words. Stepping outside the parameters of your funds stated investment strategy may lead to trouble, both for the fund and for the fund manager. This is also true with unclear and/or inconsistent investment strategy wording between your private placement memorandum and other fund documents. Language, it turns out, matters.
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