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The Bottom Line of the SEC Proposed Private Fund Rules

By Howard J. Beber, Michael Mavrides, Kelli L. Moll, Robert E. Plaze, Robert Sutton & Christopher Wells on May 3, 2022
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On February 9, 2022, the U.S. Securities and Exchange Commission (the “SEC”) proposed new rules and amendments to existing rules under the U.S. Investment Advisers Act of 1940, as amended, that would have notable practical implications for private funds advisers, in many cases regardless of the adviser’s registration status. At a high level, the proposed rules include significant requirements and restrictions for private fund advisers pertaining to, among other things: quarterly statements to investors, adviser-led secondaries transactions and prohibitions on certain adviser practices and activities. Recently, Proskauer hosted a two-part series on the Bottom Line exploring the issues raised by these proposals.

To supplement this series, we have presented a collection of questions and answers further exploring some of the issues.

Download the Q&A here.

Photo of Howard J. Beber Howard J. Beber

Howard J. Beber is a partner in the Corporate Department and co-head of the Private Funds Group, which is recognized by Chambers Global, Chambers USA and US Legal 500. His practice focuses on representing private equity funds and institutional investors on…

Howard J. Beber is a partner in the Corporate Department and co-head of the Private Funds Group, which is recognized by Chambers Global, Chambers USA and US Legal 500. His practice focuses on representing private equity funds and institutional investors on a broad range of issues including fund formations, secondary transactions and portfolio investments.

Howard is actively involved in all stages of fund formation and fund sponsor representation, counseling on terms and marketing strategy, preparing offering documents, negotiating with placement agents, drafting partnership and general partner documents, negotiating with investors and providing advice on internal general partner and management company issues. His clients range from newly formed firms to a number of leading firms in the private equity industry. In addition, he routinely represents some of the most active institutional and fund-of-fund investors when investing in venture capital, buyout, real estate and other private investment funds, as well as co-investment transactions. Howard also represents institutional investors in connection with the acquisition and sale of partnership interests on the secondary market and has worked with several management teams on large spin-out transactions.

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Photo of Michael Mavrides Michael Mavrides

Michael F. Mavrides is a partner in the Hedge Funds Group. Mike focuses his practice on representing domestic and offshore hedge funds, funds of funds and other private investment funds, including private equity and real estate investment funds. He regularly advises funds and…

Michael F. Mavrides is a partner in the Hedge Funds Group. Mike focuses his practice on representing domestic and offshore hedge funds, funds of funds and other private investment funds, including private equity and real estate investment funds. He regularly advises funds and their managers on a wide variety of issues, including formation and structuring, seed capital, anchor capital and other strategic arrangements, placement agency, solicitation and other marketing arrangements, succession planning, separately managed accounts, and all types of portfolio management, trading and operational issues.

Mike advises clients on federal and state investment adviser registration, commodity pool operator and/or commodity trading adviser registration, regulatory reporting (including Form PF, Forms 13D, F, G and H and the various Treasury Department and Bureau of Economic Analysis forms), and a wide range of other compliance matters. He has significant experience advising clients on structuring their management companies and acquiring and retaining talent, including through employment, equity and “phantom equity” arrangements. In addition, Mike advises clients on a variety of transactional matters, including joint venture agreements, derivative and structured product transactions and credit arrangements. He also counsels clients in connection with examinations and investigations by the SEC, the NFA and other federal as well as state regulators.

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Photo of Kelli L. Moll Kelli L. Moll

Kelli Moll is a partner of the Private Funds Group. With over 25 years of experience amassed advising large institutional asset managers to independent sponsors across the spectrum of asset classes, Kelli is considered a leading lawyer in the funds industry.

Kelli’s practice…

Kelli Moll is a partner of the Private Funds Group. With over 25 years of experience amassed advising large institutional asset managers to independent sponsors across the spectrum of asset classes, Kelli is considered a leading lawyer in the funds industry.

Kelli’s practice particularly focuses on counseling investment advisors on the formation and ongoing operations of hedge funds, credit funds and growth equity funds. Kelli regularly advises fund sponsors on fund formation, co-investment arrangements, upper tier arrangements, seed capital arrangements, asset manager M&A, complex fund restructurings, funds-of-one, managed accounts and various regulatory issues.

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Photo of Robert E. Plaze Robert E. Plaze

Robert Plaze’s experience gives him a unique understanding of the SEC and the federal securities laws affecting our clients. Following nearly 30 years in the SEC’s Division of Investment Management, most recently as Deputy Director, Bob is a partner in Proskauer’s Registered Funds…

Robert Plaze’s experience gives him a unique understanding of the SEC and the federal securities laws affecting our clients. Following nearly 30 years in the SEC’s Division of Investment Management, most recently as Deputy Director, Bob is a partner in Proskauer’s Registered Funds Group.

At the SEC, Bob was responsible for policy development and management of the key regulatory initiatives affecting investment companies and investment advisers, including rules governing fund and adviser compliance programs, money market funds, fund corporate governance, personal trading, custody and brokerage practices, prohibitions on “pay to play” practices, and protection of investor privacy. After the passage of the Dodd-Frank Act, Bob was responsible for rulemaking requiring advisers to private funds to register with the SEC, providing new exemptions from registration and requiring reporting by certain exempt advisers.

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Photo of Robert Sutton Robert Sutton

Robert is a partner of the Private Funds Group and a member of the Corporate Department. He is a seasoned practitioner with over 20 years of experience counseling managers and advisers of private funds on regulatory matters, as well as regulatory issues related…

Robert is a partner of the Private Funds Group and a member of the Corporate Department. He is a seasoned practitioner with over 20 years of experience counseling managers and advisers of private funds on regulatory matters, as well as regulatory issues related to the formation and operation of private equity, credit, real estate, infrastructure, hedge and other private funds.

Rob has a deep knowledge of the market practice of asset managers and in particular, as it relates to Advisers Act-related issues. From some of the largest and most sophisticated firms in the global asset management industry to start-ups and mid-sized firms, Rob’s experience includes a wide spectrum of funds and asset classes across their life cycles. Rob regularly advises on matters in connection with: U.S. investment adviser registration and regulation; Advisers Act and other U.S. securities law issues relating to the formation, marketing and offering of private funds; Identifying and managing conflicts of interest, and addressing related Advisers Act risks, SEC examinations, and exam readiness preparation; Design and implementation of investment adviser compliance policies and procedures; U.S. regulatory issues relating to purchases and sales of investment advisory businesses (minority stake and control stake transactions, buy-side and sell-side representations); Advisers Act and other U.S. regulatory issues relating to private fund restructurings and recapitalizations, strip sales, continuation fund formations and similar transactions; Advisers Act issues relating to the formation of SPACs by investment advisers; and, Investment Company Act status analyses of private fund structures, investment transaction structures and other non-registered investment company structures.

Rob has been recognized by his clients and peers for his extraordinary work, gaining various accolades including mentions in preeminent directories such as The Legal 500.  He is also very active within the private funds industry, contributing to numerous publications and collaborating on several speaking engagements.

Prior to joining Proskauer, Rob was a partner in the Investment Funds Group at Kirkland & Ellis.

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Photo of Christopher Wells Christopher Wells

Chris heads Proskauer’s Hedge Fund Group and has been a leading lawyer in the hedge fund industry for more than 30 years. During that time, he has assisted on hundreds of hedge fund launches, counselling and assisting hedge fund managers as they grew…

Chris heads Proskauer’s Hedge Fund Group and has been a leading lawyer in the hedge fund industry for more than 30 years. During that time, he has assisted on hundreds of hedge fund launches, counselling and assisting hedge fund managers as they grew from often very modest beginnings to become some of the world’s largest and best known hedge funds.

He advises fund managers and investors on all aspects of the hedge fund business, including fund structuring and formation, seed investments, asset manager M&A transactions, agreements among principals, employment and compensation issues, and regulatory and enforcement matters.

Chris’s long and deep experience in the hedge fund industry gives him a unique ability to counsel clients dealing with some of the most challenging situations that fund managers can encounter, including complex fund restructurings, evolving hedge fund investment terms, hybrid and alternative fund structures, liquidity challenges and constraints, internal disputes, and complex enforcement matters.

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  • Posted in:
    Financial
  • Blog:
    The Capital Commitment
  • Organization:
    Proskauer Rose LLP
  • Article: View Original Source

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