Regulatory Compliance Association Reviews

The SEC’s Renewed Focus on Conflicts of Interest of Asset and Fund Managers

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Through speeches, examinations and enforcement actions, the SEC and its staff have made clear that they consider asset managers’ conflicts of interest to be one of the agency’s primary focus areas. While conflicts of interest have always been a focus of the SEC, the organization of the Enforcement Division Asset Management Unit and the National Examination Program have prompted the SEC to home in on conflicts with an attention to detail and a zeal for prosecution that are new to the asset management industry. In particular, the SEC and its staff have indicated concerns about a number of conflicts of interest that may be present in unique or heightened form in the operations of hedge fund and private equity fund managers. As a result, the SEC’s activities in this area have created new and more defined regulatory expectations that unfortunately are not stated expressly through rulemaking or interpretive guidance.

This Session will discuss many of the most important new expectations, as well as the cases and pronouncements that have prompted them. The Session also will describe a number of practical techniques and procedures to address and mitigate these conflicts of interest. In order to address these emerging issues and risks, the RCA’s Law and Masters Concentration Faculty, and Guest Lecturers provide an in depth, candid discussion and provide practical commentary regarding key concerns including:

  • Side letters and differences in investors’ terms, especially on liquidity/redemption and information/transparency rights
  • Allocation of expenses between the manager and its funds
  • Conflicts that arise from the relationship between a private fund manager and its funds’ portfolio companies, including. The conflicts arise from (1) allocation of fund and portfolio company expenses; (2) relations with service providers and vendors; (3) expense shifting between funds; (4) portfolio company capital structure; and (5) transaction, monitoring, consultancy, and directors fees paid by portfolio companies to a manager or its personnel
  • Funds assisting funds, including through loans or follow-on investments
  • “Side-by-side” management of performance fee and non-performance fee accounts or funds
  • Trade and investment allocation issues, cherry picking and issues arising from co-investment practices and arrangements

Session Chairman:
Walter Zebrowski, JD, CPA, Principal, Hedgemony Partners
Chairman, Regulatory Compliance Association

Senior Fellow from Practice:
Tom Biolsi, Principal, PriceWaterhouse Coopers

Guest Lecturers:
Anthony Kelly, JD, Assistant Director, Division of Enforcement, Asset Management Unit, SEC*
Dov Lando, JD, Managing Dir, General Counsel, MKP Capital
Maryellen Maurer, Senior Compliance, TPG Capital
Mark Perlow, JD, Partner, K&L Gates
David Harpest, JD, Financial Svcs Regulatory Consulting, PWC
Matthew Nullet, CPA, Financial Svcs Regulatory Consulting, PWC

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