Tag Archives: Securities and Exchange Commission

Head of SEC Announces Resignation

On Monday, Nov. 14, Mary Jo White, the head of the Securities and Exchange Commission (the “SEC”) announced that she will resign when President Obama leaves office; two years before the end of her term.  Over the past eight years, the SEC has played a major role in the Obama administration’s effort to regulate big banks.  However, White’s resignation opens the door to President-elect Trump’s promise to deregulate the industry, specifically by targeting the Dodd-Frank Act.… Read More

SEC Proposes New Rule Effecting Registered Investment Advisors

On June 28, 2016, the SEC proposed a new rule applicable to private equity funds that are Registered Investment Advisors. The proposed rule would require these private equity funds to adopt and implement written business continuity and transition plans. The full text of the rule proposal is available at https://www.sec.gov/rules/proposed/2016/ia-4439.pdf.

The purpose of the rule is to ensure that private equity funds are addressing operational and other risks that could result from a significant disruption in their operations or … Read More

Unregistered Broker-Dealers and Private Equity Firms

On June 1, 2016, the Securities and Exchange Commission (the “SEC”) announced a settlement with Blackstreet Capital Management, LLC (“BCM”), a Maryland-based private equity firm, and its principal, Murry Gunty, that could negatively impact the ability of private equity funds to charge transaction fees in the future.[1]  Private equity funds have long charged fees at the closing of portfolio company transactions for their work in facilitating those transactions.  These fees have become an important aspect of private equity fund … Read More

SEC Audits of PE Firms: 3 Must Dos

As we have noted in earlier posts, the SEC has had increased authority over the private equity industry since Dodd-Frank was passed in 2010. Several years ago, an SEC official remarked that SEC exams “identified what we believe are violations of law or material weaknesses in controls over 50% of the time” (see below for link to quote). Not surprisingly, the Office of Compliance Inspections and Examinations of the SEC identified the examination of private fund advisors, with a focus … Read More

Side Letter Agreements and Private Equity Funds: Limitations on Undisclosed Preferences

Side letter agreements are a common component of the relationship between registered investment advisers and their largest investors. Side letter agreements often provide expanded rights and preferences to certain investors; concomitantly, other investors have narrower rights. Regulators in the U.S. and UK have raised concerns about undisclosed side letters. So, what are the limitations on the side letters?

The most common terms and conditions found in side letter agreements include:

  • Liquidity preferences or waiver of lock-up rights.
  • Reductions in, or
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