Firm News
Schulte Partners Author 2015 Edition of Private Equity Funds: Formation and Operation
June 2015
Partners Stephanie R. Breslow and Phyllis A. Schwartz have updated and expanded the 2015 edition of their book Private Equity Funds: Formation and Operation, published by Practising Law Institute. This comprehensive treatise is regularly updated and covers the complex legal and regulatory issues of private equity funds to assist advisers and fund managers.
The 2015 edition includes new sections that discuss the definition of “custody” under Rule 206(4)-2 of the Investment Advisers Act of 1940 and recent enforcement actions that underline the SEC’s focus on the allocations of fees and expenses to clients by private equity managers as a major regulatory compliance concern. The authors explain the features, advantages and drawbacks of different kinds of funds, including PIPEs, SPACs, mezzanine funds and credit opportunity funds, as well as the efficiencies created when private equity funds and hedge funds converge. Designed to provide a thorough understanding of how private equity funds work and how they are regulated, Private Equity Funds: Formation and Operation also discuss the negotiation of terms between fund sponsors and investors, including fund size, the investment program, capital commitments and contributions, distributions and related documentation.
Considered the leading treatise on the subject, Private Equity Funds: Formation and Operation walks readers through every decision that has to be made in creating a new fund, including choosing the right organizational options for funds and their sponsors; structuring and implementing ownership and compensation arrangements that work best for each fund; hiring and retaining the best fund talent; and qualifying for the Securities Act’s private placement exemption, the IAA’s exclusion from registration as an investment adviser and other exemptive relief.
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Alerts
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Alerts
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Alerts
On Jan. 10, 2024, the US Department of Labor (“DOL”) published its final rule on employee or independent contractor classification under the Fair Labor Standards Act (“FLSA”) for purposes of minimum wage and overtime. The final rule became effective March 11, 2024.
Alerts
On Feb. 6, the Staff of the US Securities and Exchange Commission’s Division of Investment Management (“Staff”) issued an updated FAQ (“FAQ”) with respect to Investment Advisers Act Rule 206(4)-1 (“Marketing Rule”), excerpted below,[1] addressing the presentation of gross and net internal rates of return (“IRRs”) when the fund uses subscription lines to fund investments. Although the Staff, for quite some time, has focused during examinations on the methodology used to calculate gross and net IRRs when subscription lines are used to fund investments, the amended Marketing Rule that went into effect in November 2022[2] specifically requires that gross and net performance be calculated and presented using the same methodology and over the same period of time. In the FAQ, the Staff expressed its view that certain historical performance reporting practices are no longer permitted under the Marketing Rule, even with clear disclosure regarding the differences in methodologies utilized to calculate the net and gross performance shown.
Alerts
On March 1, 2024, Judge Liles C. Burke of the US District Court for the Northern District of Alabama found the Corporate Transparency Act (“CTA”) unconstitutional. The CTA, which was enacted on Jan. 1, 2021, requires certain legal entities (known as “Reporting Companies”) to file beneficial ownership information reports (“BOI Reports”) with the US Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”).[1] Judge Burke’s 53-page opinion concluded that “the CTA exceeds the Constitution’s limits on the legislative branch and lacks a sufficient nexus to any enumerated power to be a necessary or proper means of achieving Congress’ policy goals.”[2] Judge Burke also issued a final judgment permanently enjoining the US Government from enforcing the CTA against the two plaintiffs —the National Small Business Association, a non-profit trade group that represents more than 65,000 member companies, and one of its members.[3]