Private Equity Compliance

CHAPTER 2Compliance Obligations of General Partners

2.1 UNDERSTANDING THE DISTINCTIONS BETWEEN GP-, FUND-LEVEL, AND PORTFOLIO COMPLIANCE

In Chapter 1 we introduced a three-tiered framework across important levels at which different aspects of compliance can be implemented within the private equity investing landscape. For reference they are:

1. General partner (GP)–level compliance
2. Fund-level compliance
3. Portfolio company compliance as it relates to the GP and funds

From a compliance perspective, drawing distinctions across the compliance activities in each level is important so that we can assess the appropriate compliance obligations at each level. This will then facilitate our understanding of how compliance policies applicable to each entity are subsequently drafted, implemented, and monitored. It should also be noted that subgroups of these three categories may come into play depending on the specific compliance focus employed.

An example of the use of these subgroups would be compliance as it relates to limited partners (LPs) invested in a fund. If we wanted to, we could break out another additional category, in addition to the three levels above, called LP compliance. However, for the purposes of our discussion here these LP obligations would be included at the GP and fund-level compliance categories outlined above. It is simply a matter of preference in classification systems and a focus on which entities are being analyzed. For our discussion, therefore, we will utilize ...