Questions and Concerns
My last post was an open letter to hedge fund managers and private equity investors, and I’d like to share a few follow up concerns and questions.
Fund marketing must be more transparent. Firms must provide historical documents showing how they calculate internal rates of return.
What if some numbers in a firm’s marketing materials contradict numbers in its SEC filings for non fraudulent reasons? Will the firm be liable and subject to sanctions?
The SEC is permitted to share information with certain agencies. Will this lead to congressional access resulting in investment strategies becoming a matter of public record?
What is Next?
After the Advisors Act deadline passes, buyout shops will have a new Form PF which private equity firms will be required to file once a year within 120 days of the end of the fiscal year.
Firms with at least $2 billion in assets under management will be required to answer questions at the portfolio-company level about leverage, bridge financing and financial-industry investment. Firms with over $5 billion in assets must file Form PF following the first fiscal year after June 15, 2012. Firms with under $5 billion must begin filing the first year after December 15th of this year.
The Volker Rule
The Volcker Rule, which is to be finalized in the next few months, will prohibit banks from engaging in proprietary trading and from owning proprietary or sponsoring private equity funds.
One question: Will break-ups be truly “arms length” or will banks have merely created third party entities to do proprietary trading? What do you think?