The U.S. Securities and Exchange Commission (SEC) frequently focuses its examination and enforcement efforts on how private fund managers disclose the allocation of fees and expenses to investors. Since 2012, the start of the SEC’s Presence Exam Initiative, the SEC’s Office of Compliance Inspections and Examinations (OCIE) routinely makes fee and expense disclosures and practices one of the areas of greatest scrutiny with respect to private fund managers. In addition to satisfying fiduciary obligations as investment advisers under Investment Advisers Act of 1940, private fund managers should also be mindful of the demands of institutional investors for increased transparency regarding fees and expenses, and be sure that disclosures are clear, practices are transparent to investors, and that fee and expense policies are followed by employees and service providers alike.

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Related Content

• Investor’s Counsel Conducting the Private Equity Fund Review
  Read this guidance from the perspective of investor counsel to learn how to analyze and negotiate the fee and expense provisions in private equity fund documentation.
• SEC Enforcement Priorities for Private Equity Firms
  Consult this explanation of recent SEC cases and regulatory initiatives that provide useful insights and recommendations for fund counsel’s compliance activities.
• Transaction Fee Side Letter Clause (Private Equity Fund)
  See this sample side letter clause that details the transaction fee disclosure arrangement between a private equity fund manager and an investor in the fund.

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