Legal Risk Management Tips

In his May 2014 speech titled “Spreading Sunshine in Private Equity,” Andrew Bowden, the Director of the Office of Compliance, Inspections and Examination (“OCIE”) of the U.S. Securities and Exchange Commission (“SEC”) publicly announced that the private equity sector had become a focus for OCIE.[1]  Over the next two years, the financial services industry has seen a continued and increasing focus by OCIE, and by the SEC’s Division of Enforcement, on the private equity space.  Recent comments by Jane Jarcho, the new Deputy Director of OCIE, indicate that private equity advisers and their funds will remain as a high priority for the SEC in 2017.[2]

 The ability of a private equity fund’s manager to obtain capital commitments from investors is critical to the fund’s success.  Unlike hedge funds which provide managers with the ability to reinvest non-withdrawing investors’ investment proceeds, private equity funds have relatively limited reinvestment ability and generally must distribute investment proceeds to its investors.  Therefore, in order to keep making new investments, private equity fund managers must create and finance new funds every few years, which then requires new promotional materials for each new fund.