Private Equity Compliance

CHAPTER 8Understanding Private Equity Compliance Documentation

8.1 INTRODUCTION TO KEY PRIVATE EQUITY COMPLIANCE DOCUMENTS

The previous chapters outlined a framework for developing and analyzing private equity compliance. This discussion made reference to several different types of compliance-related documentation. In this chapter we focus in more detail on the function and role of private equity documentation. This will include a discussion of both fund-level and general partner (GP)–level compliance documentation. As we have addressed fund-level documentation in previous chapters, the bulk of the discussion will focus on GP-level compliance documentation. Prior to diving into specific compliance documents, it is beneficial to discuss the purposes and benefits of documenting compliance.

8.2 PURPOSES OF DOCUMENTING COMPLIANCE

Both at the fund and GP level, documenting compliance serves two primary purposes. The first is what is known as meeting minimum regulatory compliance. For example, US Securities and Exchange Commission (US SEC) Rule 206(4)-7(b), the Investment Advisors Act of 1940 (Advisers Act), outlines that a broad regulatory classification of entities known as investment advisers, which would include covered private equity funds, must conduct an annual review of their policies to ensure “the adequacy of the policies and procedures established pursuant to this section and the effectiveness of their implementation.” Therefore, if a registered GP did not both document ...