Managers and fund sponsors with a focus on the private capital markets present certain challenges to compliance practitioners given the public markets orientation of investment adviser regulation. Implementing an effective, yet undisruptive compliance program requires experience balancing the nuances of the business and efficiently installing conflict identification and management measures.
With a heavy client concentration of private equity and venture capital funds, our team has exposure to all sorts of structures – from the rudimentary to the highly complex – which allows us to be proactive in asking the right questions, offering anecdotes from past experiences, advising on risk and addressing matters before they materialise into substantive regulatory issues.
Today’s investing environment is characterised by innovation, and while the traditional buyout model where a fund buys, operates and sells a portfolio company still exists, the private equity/venture capital market has gotten increasingly more sophisticated. And with this sophistication comes the need for thoughtful, dynamic counsel, which is where we can advise on matters related to the following, amongst many others:
- Co-investments and limited partner rights
- Valued-added investors and operating partners
- Information barriers and wall crossings
- Principal and cross transactions
- Affiliated arrangements and non-arm’s-length transactions
- General partner (GP)-led restructurings
- Allocation of expenses and operating costs
- Limited Partner Advisory Committee (LPAC) structure and approval/consent process
- Liquidations and distributions
With respect to venture capital, we routinely work with firms to evaluate their fund governing documents and investment portfolio to determine whether they qualify for an exemption from investment adviser registration. Whereas the availability the “private fund adviser” exemption requires a fairly simplistic analysis, the “venture capital adviser” exemption calls for a more in-depth review of a fund’s portfolio composition, borrowing allowances and redemption rights, which determines whether a firm needs to register as an investment adviser or can file as an exempt reporting adviser (ERA). Consistent with our universal dedication to pragmatism, we want to ensure our clients are well-informed about their regulatory options so they can pursue the path that is both legally sound and consistent with their LPs’ expectations and longer-term growth prospects.