Private equity compliance: analyzing conflicts, fees, and risks

195 Pages·2018·1.44 MB·English

by  Scharfman

Table of Contents
Cover
Preface
CHAPTER 1: Introduction to Private Equity Compliance
1.1 INTRODUCTION
1.2 WHAT EXACTLY IS PRIVATE EQUITY?
1.3 PRIVATE EQUITY TERMINOLOGY
1.4 MANDATORY COMPLIANCE
1.5 VOLUNTARY COMPLIANCE
1.6 DISTINGUISHING INVESTMENT AND OPERATIONAL COMPLIANCE
1.7 HISTORICAL GENERAL PARTNER COMPLIANCE EFFORTS
1.8 TRANSITION TO INCREASED REGULATION OF PRIVATE EQUITY
1.9 WHAT IS PRIVATE EQUITY COMPLIANCE?
1.10 SUMMARY
NOTES
CHAPTER 2: Compliance Obligations of General Partners
2.1 UNDERSTANDING THE DISTINCTIONS BETWEEN GP-, FUND-LEVEL, AND
PORTFOLIO COMPLIANCE
2.2 GENERAL PARTNER COMPLIANCE
2.3 GENERAL PARTNER BOARD SEAT OVERSIGHT CONSIDERATIONS
2.4 FUND-LEVEL COMPLIANCE
2.5 GP COMPLIANCE STRUCTURES
2.6 PRIVATE EQUITY CHIEF COMPLIANCE OFFICERS
2.7 SUMMARY
NOTE
CHAPTER 3: Limited Partner Advisory Committees and Other Boards
3.1 INTRODUCTION TO LIMITED PARTNER ADVISORY COMMITTEES
3.2 SOURCE OF LPAC RESPONSIBILITIES: THE PPM AND LPA
3.3 THERE IS TYPICALLY NO REQUIREMENT FOR AN LPAC TO EXIST
3.4 COMMON LPAC DUTIES
3.5 LPAC FORMATION CONSIDERATIONS
3.6 ARGUMENTS IN FAVOR AND AGAINST LPACS
3.7 SUMMARY
NOTE
CHAPTER 4: Valuation Compliance
4.1 INTRODUCTION TO PRIVATE EQUITY VALUATION
4.2 INTRODUCTION TO PRIVATE EQUITY VALUATION
4.3 GP VALUATION COMMITTEES
4.4 VALUATION POLICIES
4.5 VALUATION FREQUENCY
4.6 LPAC VALUATION OVERSIGHT
4.7 CASE STUDIES IN VALUATION
4.8 SUMMARY
NOTES
CHAPTER 5: Conflicts of Interest
5.1 INTRODUCTION TO CONFLICTS OF INTEREST
5.2 DEFINING A CONFLICT OF INTEREST
5.3 FUND FORMATION CONFLICT-OF-INTEREST DISCLOSURES
5.4 PREEXISTING INTERESTS AND THOSE ACQUIRED FROM OTHER FUNDS
5.5 GP EMPLOYEE OR AFFILIATE DIRECT INVESTMENTS
5.6 FRONT-RUNNING CONSIDERATIONS
5.7 RELATED-PARTY TRANSACTIONS
5.8 DEAL ALLOCATION
5.9 PLACEMENT AGENTS' CONFLICTS OF INTEREST
5.10 CASE STUDIES IN CONFLICTS OF INTEREST
5.11 CASE STUDY #2: CENTRE PARTNERS MANAGEMENT, LLC
5.12 SUMMARY
NOTES
CHAPTER 6: Fees and Expenses – Compliance Considerations
6.1 INTRODUCTION TO PRIVATE EQUITY EXPENSES AND FEES
6.2 WHY ARE FEES AND EXPENSES IMPORTANT TO COMPLIANCE?
6.3 TRANSACTION FEES VS. FUND-LEVEL FEES
6.4 TYPES OF FUND-LEVEL FEES
6.5 FEES AND PORTFOLIO COMPANY DIRECTORSHIP CONFLICTS
6.6 OPERATING PARTNER FEES
6.7 CASE STUDIES IN FEE AND EXPENSE MANAGEMENT
6.8 SUMMARY
NOTES
CHAPTER 7: Private Equity Compliance Technology, Business Continuity, and
Cybersecurity
7.1 INTRODUCTION TO THE ROLE OF TECHNOLOGY IN PRIVATE EQUITY
COMPLIANCE
7.2 REGULATORY FOCUS ON TECHNOLOGY COMPLIANCE
7.3 CYBERSECURITY COMPLIANCE IMPLICATIONS
7.4 DATA ROOMS
7.5 SUMMARY
NOTES
CHAPTER 8: Understanding Private Equity Compliance Documentation
8.1 INTRODUCTION TO KEY PRIVATE EQUITY COMPLIANCE DOCUMENTS
8.2 PURPOSES OF DOCUMENTING COMPLIANCE
8.3 BENEFITS OF DOCUMENTING COMPLIANCE
8.4 DISTINGUISHING LEGAL AND COMPLIANCE TERMS IN FUND OFFERING
DOCUMENTS
8.5 KEY GP COMPLIANCE DOCUMENTATION
8.6 CASE STUDY: WL ROSS & CO. LLC
8.7 SUMMARY
NOTES
CHAPTER 9: Compliance Training, Surveillance, and Testing for Private Equity Firms
9.1 INTRODUCTION TO PRIVATE EQUITY TRAINING, SURVEILLANCE, AND
TESTING
9.2 GROWTH OF TST
9.3 COMPLIANCE TRAINING
9.4 DISTINGUISHING COMPLIANCE TESTING AND SURVEILLANCE
9.5 TESTING AND SURVEILLANCE SCOPE
9.6 IMPLEMENTING COMPLIANCE TESTING
9.7 INCORPORATING MOCK AUDITS INTO TESTING
9.8 COMPLIANCE SURVEILLANCE IMPLEMENTATION
9.9 ANALYZING TESTING AND SURVEILLANCE DATA
9.10 CORRECTIVE ACTION
9.11 COMPLIANCE VIOLATIONS DO NOT NECESSARILY IMPLY GP OR FUND
PROFITS
9.12 SUMMARY
NOTES
CHAPTER 10: Limited Partner Analysis of Private Equity Compliance Functions
10.1 A COMPLIANCE EVALUATION IS PART OF THE OVERALL DUE
DILIGENCE PROCESS
10.2 GOALS OF INVESTOR COMPLIANCE ANALYSIS
10.3 DISTINGUISHING INITIAL VERSUS ONGOING COMPLIANCE DUE
DILIGENCE
10.4 INITIAL COMPLIANCE DUE DILIGENCE PROCESS
10.5 INCORPORATING VENDORS INTO COMPLIANCE POLICIES
10.6 CASE STUDY: BLACKSTREET CAPITAL MANAGEMENT
10.7 SUMMARY
NOTES
CHAPTER 11: Interviews with Private Equity Compliance Professionals
11.1 BIOGRAPHY AND INTERVIEW WITH DR. THOMAS MEYER
11.2 BIOGRAPHY AND INTERVIEW WITH MATTHEW DEMATTEIS –
INSTITUTIONAL LIMITED PARTNERS ASSOCIATION (ILPA)
11.3 BIOGRAPHIES AND INTERVIEW WITH CLAIRE WILKINSON AND
LUDOVIC PHALIPPOU
CHAPTER 12: Compliance Trends and Future Developments
12.1 INTRODUCTION
12.2 SPECIALIZED REGULATORY FOCUS ON PRIVATE EQUITY
12.3 FOCUS ON PRIVATE EQUITY FEE TRANSPARENCY
12.4 MIFID II AND PRIIPS PRIVATE EQUITY TRANSPARENCY CHANGES
12.5 REGULATORY FOCUS ON PRIVATE EQUITY DATA SECURITY
12.6 INCREASED SCRUTINY ON PRIVATE EQUITY RESEARCH DATA
COMPLIANCE
12.7 FURTHER SCRUTINY OF POTENTIAL PAY-TO-PLAY VIOLATIONS
12.8 CHAPTER SUMMARY
NOTES
About the Author
Index
End User License Agreement
List of Exhibits
Chapter 2
Exhibit 2.1 Distinguishing GP-, fund-level, and portfolio company compliance.
Exhibit 2.2 Example of compliance manual applicability among the GP-, fund-level,
and portfolio company.
Chapter 3
Exhibit 3.1 Limited partner advisory committee and joint committee structure.
Chapter 4
Exhibit 4.1 LPAC Valuation Oversight Decision Tree Example
Chapter 7
Exhibit 7.1 Three common private equity general partner uses of data rooms.
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Private Equity Compliance
Analyzing Conflicts, Fees, and Risks
JASON A. SCHARFMAN
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