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T H E P R I M E R U S P A R A D I G M
Keith Kessel has been a corporate, securities and transactional
lawyer and compliance professional in the financial services industry
for the past 20 years. He specializes in the corporate finance, private
equity, venture capital and financial services industry laws and
regulations. He is also active in mergers and acquisitions, licensing,
contracts generally and arbitration.
Procope & Hornborg
Keskuskatu 8
P.O. Box 1077
00101 Helsinki, Finland
+358 10 3090 300 Phone
+358 10 3090 333 Fax
keith.kessel@procope.fi
www.procope.fi
Keith Kessel
The economic, regulatory and political
landscape relative to private equity
continues to evolve. Regulatory focus,
investor skepticism and public scrutiny
are arguably at historic highs. The media
has highlighted several of the abuses,
fueling the negative sentiment for the
private equity business model. As a
consequence, the risks to private equity
firms have never been higher. Therefore,
it is incumbent upon firms operating in
this business to dedicate the time and
resources to effectively assess deals,
critically evaluate all facets of the deals
and vigilantly supervise sales and post-
sale customer service. Moreover, firms
must be able demonstrate that they have
earnestly discharged their due diligence,
supervisory and, where applicable,
fiduciary responsibilities. Compliance
personnel can enhance their value to
a firm by effectively shepherding this
process.
How to Establish a Private
Equity Program
1. Private Funds
·
Form/appoint investment adviser
·
SEC versus state registration
thresholds and definitions
·
Self-distribution (SEC Rule 3a4-1);
Use brokers/dealers to distribute
or investment advisers to "no-load
distribute"
·
Blend special purpose vehicles
(SPVs) and their formation documents
with private equity/fund regulations
·
Private equity/private fund offering
documentation and compliance
controls
·
Compliance manual
2. Investment Advisers ("IAs")
·
Develop/revise ADV form for private
equity product/service line
·
Update investment advisory
contract(s) for investors and funds
and valuation service providers,
custodians, et. al.
·
Distinguish IA role - who do you
advise (advise investor clients re:
Private Equity products vs. advise
issuer/fund)
·
If IA is limited to Private Equity/
Private Funds, evaluate registration
obligations
·
File Form PF for qualifying funds
·
Evaluate state registration for private
funds not required by Form PF &
SEC registration
·
New products review committee
·
Compliance manual
3. Broker/Dealers ("BDs")
·
FINRA Rule 1017 approval /
Membership Agreement
·
Revise compliance procedures per
FINRA WSP checklist, etc.
·
New products review committee
·
Due diligence committee ­ FINRA
guidance on due diligence
·
Develop escrow agreement per SEC
Rule 15c2-4
·
Develop placement agent selling
agreement
Legal and Deal Considerations of U.S. Private
Investment Funds and Investment Management
Europe, Middle East & Africa