Broadened Scope of ERISA Fiduciary Rules After several years of debate and revision, a Department of Labor (DOL) regulation, revising the definition of a “fiduciary” as it applied to investment managers, became applicable on June 9, 2017. The new regulation expands the definition of “fiduciary” under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986, as amended, to …
Proposed FINRA Rule 5123: Enhanced Investor Protection or Unnecessary Regulatory Burden?
Originally proposed on October 5, 2011, FINRA Rule 5123 (the “Rule”) would, if adopted, significantly increase the regulatory burden on certain issuers, such as private funds, and FINRA members involved in private placement of securities such as third party marketers, placement agents, solicitors and finders involved in private placements and may encourage issuers to rely on the services of unregistered intermediaries to facilitate introductions to …
Finders Exception to Broker-Dealer Registration in the Capital Introduction Space
As competition for capital has steadily increased for private companies and private funds, issuers and managers have turned to the services of third party marketers (“TPMs”) to raise capital or sell their funds to prospective investors. In the hedge fund space, TPMs typically demand an exclusive arrangement with the fund and approximately 20% of all fees. But due to the nature of their services and …
Structural Difficulties Posed by Hedge Funds Investing In Illiquid Securities
As the number of hedge funds pursuing similar strategies has grown, managers have increasing looked to private equity and other illiquid assets to generate alpha. However, the traditional hedge fund structure is meant to facilitate investing in liquid securities that are readily marked-to-market. Housing illiquid assets under the traditional hedge fund model can result in a variety of potential problems in the area of taxation, …