Private Equity Compliance Update: Conflicts of Interest, Fees and Expenses, Nonpublic Information, and the New Marketing Rule

Current SEC Focus and What to Expect From the Incoming Administration

Recording of a 90-minute premium CLE video webinar with Q&A


Conducted on Thursday, February 25, 2021

Recorded event now available

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Course Materials

This CLE course will discuss current compliance issues highlighted by the SEC after examining private fund advisers in 2020 as well as the SEC’s recently adopted Marketing Rule. The panel discussion will include conflicts of interest in fund activities and investments, fees and expenses disclosures, issues with the treatment of nonpublic information, and the compliance framework established under the new marketing rule.

Description

The SEC's Office of Compliance Inspections and Examinations (OCIE) recently issued a risk alert on private fund advisers' deficiencies. This guidance focuses on disclosure deficiencies regarding conflicts of interest and fees and expenses, and treatment of material nonpublic information (MNPI), among other compliance issues. Advisers and their counsel should carefully evaluate fund policies and procedures to avoid the pitfalls described in the OCIE Risk Alert.

Conflict of interest disclosures should include client investments, co-investment opportunities, and allocations within the fund. Special concerns arise when fund managers operate multiple funds that involve both debt and equity investments. Sponsors should have policies and procedures in place that properly allocate investments and resources between their PE and private credit funds.

Counsel to funds should thoroughly assess advisory fees and expense practices and clearly disclose fees and expenses allocated to the fund. Regarding the treatment of MNPI, managers should have internal processes for adding and removing restricted securities, enforcement of trading restrictions, and approval of personal securities transactions.

In December 2020, the SEC adopted a new marketing rule (Marketing Rule) which imposes many new and detailed compliance requirements on investment advisers that engage in marketing activities and/or are party to referral or solicitation arrangements with placement agents. Registered investment advisers will need to review their marketing and solicitation policies and procedures in light of the new compliance requirements in the Marketing Rule.

Listen as our authoritative panel provides an update on compliance issues currently emphasized by the SEC in its examinations and best practices for private equity advisers to address them.

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Outline

  1. OCIE regulation of PE funds generally: types of funds and activities subject to examination
  2. Highlights from recent risk alert
    1. Conflicts of interest
    2. Fees and expenses
    3. Restricting the use of MNPI
  3. Other compliance issues
  4. What to expect from the Biden administration
  5. Marketing Rule
    1. Expanded Definition of Advertisement
    2. Performance Advertising
    3. Endorsements and Testimonials

Benefits

The panel will review these and other important issues:

  • What are the key areas of focus in the recent OCIE Risk Alert?
  • What are the sources of conflicts of interest in fund management, and how should they be disclosed to investors?
  • Why are fees and expenses violations so common, and what steps should funds take to ensure fees and expenses are fully disclosed?
  • What kind of internal processes should be put in place to handle MNPI?
  • What new policies and procedures are required to comply with the marketing rule?
  • What new restrictions apply to performance advertising?
  • How can advisers engage placement agents and other solicitors under the rule?

Faculty

Browder, Justin
Justin L. Browder

Partner
Willkie Farr & Gallagher

Mr. Browder concentrates his practice on counseling investment advisers, investment funds, and broker-dealers...  |  Read More

Choe, Anne
Anne C. Choe

Partner
Willkie Farr & Gallagher

Ms. Choe is a partner in Willkie’s Asset Management Group. She advises a wide range of pooled investment...  |  Read More

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