Private Fund Managers: Navigating Recent SEC Guidance on Custody Rule, Qualified Client Status, Knowledgeable Employees, Social Media and CCO Liability

Description

Recent SEC guidance includes application of the custody rule to the use of special purpose vehicles (SPVs) for making investments, the use of escrow accounts when selling interests in portfolio companies, the use of social media, and the aggregation of different fund accounts for determination of Qualified Client status.

The SEC has issued an interpretive letter to the Managed Funds Association (MFA) providing favorable interpretations of the concept of a knowledgeable employee. The MFA letter expands the number of situations where employees of private fund managers will be considered to be knowledgeable employees.

In several speeches, senior SEC staff members have provided insight into the SEC’s approach to broker-dealer issues impacting private fund managers as well as situations where the SEC has concern about fees charged by fund managers.

Of particular concern is the recent trend of SEC actions against fund adviser chief compliance officers for the misconduct of one of the adviser’s employees. CCO/general counsel must be cognizant of the risks of personal liability for manager personnel.

Listen as our authoritative panel of finance attorneys reviews key regulatory developments impacting managers of private equity funds and other private investment vehicles. The panel will discuss recent guidance by the SEC’s Division of Investment Management and SEC enforcement actions as well as practical implications of the new guidance.