Brian Daly Talks SEC’s Private Funds Rule with Media

Akin investment management & private equity partner Brian Daly was quoted by Financial Times, The Wall Street Journal, The American Lawyer, Compliance Week and Private Funds CFO on the SEC’s new Private Funds Rule, which overhauls the way private equity, hedge funds and venture capital firms deal with investors.

In The Wall Street Journal, Brian said it is unclear if the final version of the rule will dissuade industry groups from suing the SEC. “There was a clear effort to find that sweet spot of fulfilling the chairman’s vision and not triggering a litigation challenge,” he said.

Brian told the Financial Times, “This is industrial policy. The SEC wants to be much more involved in the oversight of these institutions.” He added that the ban on passing through certain legal expenses is more punitive than it might first look.

Brian was quoted by The American Lawyer on the transparency of private equity and hedge funds in the context of new regulations. “The reporting, from hedge funds and private funds is extremely transparent,” he said. “It isn’t mutual fund transparency, but most hedge funds are sending out weekly flashes and most private equity firms are sending monthly or quarterly reports.”

Regarding the SEC’s preferential treatment rule, Brian told Compliance Week that analysis should begin with an inventory of all the fund’s accounts, and then another inventory of all side letters that lay out preferential treatment agreements. Once that is complete, funds will have to assess which activities will be prohibited, and which will be allowed with proper disclosure and/or informed consent of investors. Funds “will then have to conduct a deeper analysis to determine their fiduciary duties and understand how risky are the positions we have,” he said.

According to Private Funds CFO, the SEC will use previous guidance as the basis for its approach to regulating accelerated fees and indemnities clauses. Brian said, “The SEC enforcement division will have the ability to shape this position through selective actions. Whatever happens to the private funds rule itself, whether successfully challenged, unsuccessfully challenged, or not challenged at all, the commission’s position on a withdrawn proposal will still be there.”