Tax Executive Institute

Report
Tax and Business Related
Considerations for Private
Equity and Other Investment
Funds
Jonathan W. DePriest
Chamberlain, Hrdlicka, White, Williams & Aughtry
Tax Executive Institute – Denver Chapter
Federal Tax Day – December 10, 2013
Basic Structures PE Funds
Structure of the PE fund itself will depend
upon the nature of its investors:
– US domestic taxable
– US domestic tax-exempt
– Foreign (and from which jurisdictions)
AND the nature of its target (investee)
portfolio companies
– Foreign/Non-US
– Domestic C Corporation
– Domestic Partnership
2
Basic Structures for PE Funds
Principals/
Individuals
Non-U.S.
Investors
Certain Non-U.S.
Investors, and U.S.
Investors
Manager
Partnership or
S Corporation
Feeder Corporation
(Non-U.S.)
Management
G.P.
x% and carried
interest
Partnership
Fee for management
services
Target Investments
3
Basic Structures for PE Funds
Investor Tax Issues
– Non-US Investors
• Avoid ECI
• Avoid FIRPTA
• Avoid filing US returns
– Results often in using a foreign “blocker”
usually organized in a tax haven jurisdiction
– Parallel and co-investment structures often
necessary
4
Basic Structures for PE Funds
Investor Tax Issues – Continued
– US domestic taxable investors
•
•
•
•
PE fund itself should not bear tax
Pass-through of capital gains and losses
Minimization of “phantom” income
No reporting obligations or tax payment obligations
in non-US jurisdictions (or if incurred, ability to use
foreign tax credit)
• Avoid investing in CFCs (parallel foreign
partnership structure for non-US investments)
5
Basic Structures for PE Funds
Investor Tax Issues – Continued
– US domestic tax-exempt investors
•
•
•
•
Avoid investments in operating partnerships (UBTI)
Avoid unrelated debt-financed income (UDFI)
Avoid fees for services (UBTI)
Avoid certain insurance income
6
Basic Structures for PE Funds
Use of Swaps
– Blocker companies interpose additional level
of tax
– Use of total return swap (TRS)
• Investor puts up cash collateral for a notional
investment, and typically pays interest on the
notional amount (sometimes net of collateral)
• Institutional counterparty will hedge with
investment notional amount in PE fund
• Desire for full collateralization risks
recharacterization
7
Basic Structures for PE Funds
Use of Swaps – Continued
– Industry Director Directive (IDD) on use of
TRS by foreign investors
• Avoids 30% withholding tax
• Likely too risky
– Use of TRS by US TEIs
• Fairly common for private funds of MLPs
• Applicable to PE funds
8
Basic Structures for PE Funds
Management Fees and Carried Interests
– Limited partnership to receive management
fees – 1% LLC general partner subject to selfemployment tax, limited partnership exception
under Section 1402(a)(13) for LP share
– Investment entity to invest the manager’s
capital commitment and receive carried
interest, exceptions for self-employment tax
under Section 1402(a)(2) and (3)
9
Corporate vs. Partnership Structures for Target
(Investee) Portfolio Companies held by PE Funds
Corporate is more traditional, and frankly
presents fewer issues
– Investment by PE Fund in US domestic C
corporation often takes the form of preferred
stock
– Possible combination with debt
10
Corporate vs. Partnership Structures for
Target (Investee) Portfolio Companies held
by PE Funds
Typical features of Preferred Stock
– Dividends
– Liquidation Preference
– Redemption Rights
– Conversion rights and related anti-dilution
protections
11
Corporate vs. Partnership Structures for
Target (Investee) Portfolio Companies held
by PE Funds
Preferred Stock Dividends
– Cash
– Payment-in-kind (PIK)
– Cumulative or Compounding
• When as and if declared by the Board will
generally mean taxable upon receipt
• Automatic increase to the liquidation preference
generally means taxable as they accrue
12
Corporate vs. Partnership Structures for
Target (Investee) Portfolio Companies held
by PE Funds
Preferred Stock Dividends
– Treatment of Preferred Stock as “tax
common” by adding participating features
• Double dip – participation in dividends with
common on as-if converted basis
• Participation on liquidation of the greater of
liquidation preference or what holder would be
entitled to receive on as-if converted basis
13
Corporate vs. Partnership Structures for
Target (Investee) Portfolio Companies held
by PE Funds
Tax Common
– Allows deferral of tax on PIK dividend
– Avoids OID issues with redemption premium
14
Corporate vs. Partnership Structures for
Target (Investee) Portfolio Companies held
by PE Funds
 Traditional LTEIPs are more easily
accomplished
 Most are familiar with qualified stock options
 PE views on vesting, forfeiture, Liquidity Events
 Sale of company vs. IPO
15
Corporate vs. Partnership Structures for
Target (Investee) Portfolio Companies held
by PE Funds
Partnership is more and more prevalent
among operating companies and their
owners, and from the private equity fund’s
perspective presents conflicts among
– U.S. domestic taxable investors
– U.S. tax-exempt investors
– Foreign investors
16
Corporate vs. Partnership Structures for
Target (Investee) Portfolio Companies held
by PE Funds
Debt: Contingent Interest
– Expressed as the greater of a fixed
percentage interest rate or contingent interest
– Contingent interest expressed as a
percentage of adjusted gross revenue
– Not unlike the NPI discussed below
– UBIT Avoidance for TEIs
17
Corporate vs. Partnership Structures for
Target (Investee) Portfolio Companies held
by PE Funds
Preferred Equity in a Partnership
– Allocations of taxable income to support
preferred return upon liquidation (liquidation is
in accordance with capital accounts)
– Works well if income is growing
– Capital accounts must be reflective of the
relative rights and preferences upon
liquidation
– Getting through the waterfall
18
Corporate vs. Partnership Structures for
Target (Investee) Portfolio Companies held
by PE Funds
– Can lead to unexpected results and incentives
• Amortization of goodwill for acquisitions
• Smaller, one-off acquisitions
– Sale of Personal Goodwill
– Sale of Option
– Risk of Recharacterization
• Payment for Non-Compete vs. Compensation
• Management vs. Investor Perspectives on
Distributions
• PE investors must mark their portfolios and
EBITDA will be critical
19
Corporate vs. Partnership Structures for
Target (Investee) Portfolio Companies held
by PE Funds
– Management LTEIP Structures
•
•
•
•
•
Grants of Partnership Interests
Options Plans
Profits Interests
Bonus plans
Management Challenges Relating to All of the
Above
– Valuation, rebooking and phantom Income issues
– Earnings hits for EBITDA – consider GAAP and tax
– “Survivor” mentality for who is actually there for a
Liquidity Event
20
Corporate vs. Partnership Structures for
Target (Investee) Portfolio Companies held
by PE Funds
 State and Local Tax (SALT) Issues in
Partnerships
 Depending upon nature of investments, state tax
filings could be triggered in multiple jurisdictions
 Multiple flow-through portfolio companies in multiple
jurisdictions
 Even for de minimis amounts, penalties can be
significant and lead you to file – the analysis must be
undertaken
21
Real Assets: Oil & Gas Working Interests
Net Profits Interest Conveyance
– Fund for Domestic Taxable Investors acquires
a Working Interest
– Such Fund conveys Net Profits Interest in the
Working Interest to a parallel fund for TEIs to
allow them to invest without generating UBTI
– NPI must relate to real estate
– TEI Fund lends taxable fund cash sufficient to
finance tangible personal ppty
22
Real Assets: Oil & Gas Working Interests
• Accounting and Expense Allocation Issues
• Administrative Issues, including multiple closes
and potential need for revaluation
• Use of NPI Calculation Agent
• Cannot add or pull out properties within an NPI
conveyance after it is constituted
– PLP Structure to Accommodate Financing for
TEI Fund
– Making Taxable and Tax-Exempt Funds
Economically Equivalent
23
Real Assets: Oil & Gas Working Interests
Acquisitions & Financing Structure
Seller
Energy
Fund GP, L.P.
Lender 2
PLP L.P.
Lender 1
Taxable
Investors
Tax-Exempt
Investors
PLP
Energy
Fund II-A, L.P.
Energy
Fund II-B, L.P.
Real Assets: Timber
TIMOs – Timber Investment Management
Organization
– Actual silvicultural management, timber
cruises, etc. handled by the TIMO
– Some infrastructure and staffing to evaluate
HBU plays
25
Real Assets: Timber
631(a) vs. 631(b) cutting contracts
– Wood supply agreements are one of two types,
delivered log contracts under Section 631(a) of
the Code—the owner harvests the timber and
sells the cut logs—and pay‐as cut or lump sum
contracts under Section 631(b) of the Code—the
purchaser harvests the timber and pays for what
has been cut and the owner has a “retained
economic interest” in the timber, or the owner
sells standing timber “outright” for a lump sum.
26
Real Assets: Timber
– 631(b) cutting contracts “pay as cut” or “lump
sum” contracts produce income which is
passive income under Section 512(b) and not
UBTI in the hands of tax-exempt investors
27
Real Assets: Timber
 HBU Sales – care to avoid treatment as a
“dealer” to avoid generating UBTI and preserve
LTCGs
 Partnership agreement provisions confirming
investment purpose
 Use of SPVs for various holdings, tracking time and
efforts for HBU sale to show minimal nature
28
Real Assets: Timber
HBU Sales
 Various factors considered, with frequency and
substantiality of sales being most important
 Nature and purpose of acquisition of ppty and
duration of ownership
 Nature and extent of taxpayer’s efforts to sell ppty
 Number, extent, continuity and substantiality of the
sales
 Extent of subdividing, developing and advertising to
increase sales
 Use of business office for sales
 Time and effort habitually devoted to sales
29
Real Assets: Other
Financial distress in municipalities
Focus on key infrastructure assets
Good match for large state pension funds
– Airports
– Railways
– Toll Roads (mixed bag)
Professional management
Political challenges vs. economic reality
30
ERISA Considerations
VCOC- by taking an active role in the
management of portfolio companies, PE
funds may rely on an exemption from
ERISA for “venture capital operating
companies”
– At least 50% of assets must be invested in
“venture capital investments”
– Must exercise “management rights” with
respect to one or more of the operating
companies in which it invests
31
ERISA Considerations
REOC
– Real estate funds seek to rely on an exclusion
from ERISA for “real estate operating
companies”
• Must invest at least 50% of assets in real estate
that is managed or developed and for which the
fund has the right to substantially participate in the
management or development activities
• Delegation is possible, so long as the fund has the
right to terminate at will and actually supervises
32
ERISA Considerations
Section 408(b)(2) Regulation 2550.408b2(c) requiring covered Service Providers to
make specified periodic disclosures to
covered plans, mainly around
compensation arrangements
33
ERISA Considerations
Significant Participation Test
– A private fund is generally able to avoid
ERISA’s application if it limits the level of
investment by benefit plan investors to less
than 25% of any class of the fund’s equity
34
ERISA Considerations
Significant Participation Test
– Count all Benefit Plan Investors
•
•
•
•
Employee Benefit Plans subject to ERISA
Taft-Hartley (multi-employer) Plans
Certain church plans
IRAs – this is an easy one to miss!
– Importantly, government plans (e.g.,
CALPERs, Colorado PERA) don’t count
35
ERISA Considerations
Significant Participation Test
– Disregard Investments by manager and
affiliates (they are not counted in the
denominator to calculate the 25%)
– Test on a Class Basis
– Continuous monitoring required
36
ERISA Considerations
Assuming the private fund meets the
significant participation test, relief can be
found from the prohibited transactions
relating to parties in interest through status
as a QPAM or Qualified Professional
Asset Manager.
37
ERISA Considerations
QPAM Status
– Registered Investment Adviser; AND
– Must have in excess of $85 mm in client AUM
as of the last day of most recent FY; AND
– Must have partner/shareholder equity in
excess of $1 mm as of the most recent
balance sheet prepared in accordance with
GAAP
38
ERISA Considerations
Other Consequences of holding plan
assets
– Performance Fees
– Use of Affiliated Brokers
– Cross Trades
– Principal Transactions
– Custody
– Employer Securities
– Expenses
39
ERISA Considerations
Other consequences of holding plan
assets continued
– Expenses
– Indemnification
– Potential Plan Sponsor Liability
– Co-Fiduciary Liability
– Fidelity Bonding
– Information Reporting
40
ERISA Considerations
Performance Fees permissible if
– Fund manager is an RIA
– Decision to hire Fund manager (i.e., to invest
in the Fund) and to pay performance fee
made by independent fiduciary of each benefit
plan investor
– Each benefit plan investor has total assets of
at least $50 mm
– Investor can withdraw from the Fund on
reasonably short notice
41
ERISA Considerations
Performance Fees Continued
– Arrangement complies with Advisers Act Rule
205-3
– Total fees paid do not exceed reasonable
comp
– Fund manager or affiliates do NOT act as
market maker for securities transactions by
Fund
42
ERISA Considerations
Performance Fees Continued
– Perf Fee determined on annual performance,
taking into account both realized and
unrealized gains and losses, and where
termination date is other than an anniversary
date, net profit is determined from the
beginning of the prior full year through
termination date
43
ERISA Considerations
Performance Fees Continued
– FINALLY, each benefit plan investor’s
fiduciary represents that it fully understands
the formula for calculating the perf fee and the
risks associated with such arrangements
These criteria ONLY APPLY if the
manager is an investment manager under
ERISA, which it would not be if the
significant participation test is satisfied.
44
Other Investment Fund Considerations for
Partnerships: PTP Rules under 7704
Under IRC Section 7704, a partnership
with more than 100 investors will be
treated as a “publicly traded partnership”
and taxed as a corporation if interests in
the partnership are traded on an
established securities market or a
secondary market or the substantial
equivalent of such a market.
45
Other Investment Fund Considerations for
Partnerships: PTP Rules under 7704
Options?
– Limit income to “qualifying income”
• Can be difficult to achieve 90% or more gross
income as investment-type income
• Commodities don’t generally qualify
• Mezzanine financings don’t generally qualify
– Limit withdrawals to redemption and
repurchase safe harbor
– Limit the number of investors to 100, per the
private placement safe harbor
46
Other Investment Fund Considerations for
Partnerships: PTP Rules under 7704
Resulting Practice: Strict Adherence to
Private Placement Safe Harbor for
Institutionally-Oriented Funds to support a
“will” tax opinion
– Use of Multiple Funds with 100 partners
– Modifying Investment Strategies (particularly
targeted volatility levels) among funds to
distinguish them
47
Other Investment Fund Considerations for
Partnerships: PTP Rules under 7704
For PE funds, strict policing of transfers
and secondary transactions is needed to
establish that the substantial equivalent of
a secondary market does not exist, where
the PE fund has more than 100 partners
 Contrast with secondary managers with
significant funds to deploy
48
Other Investment Fund Considerations for
Partnerships: PTP Rules under 7704
Growing use of Commodities
– 90% Qualifying Income under 7704(d) –
relevant if a partnership exceeds 100 partners
and permits withdrawals more frequently than
quarterly, outside of the redemption and
repurchase safe harbor
– Commodities-related income and gain is only
Qualifying Income if “a principal activity” of the
partnership is buying and selling commodities
or options, futures or forwards with respect to
commodities
49
Other Investment Fund Considerations for
Partnerships: PTP Rules under 7704
– Scant Guidance as to what “a principal
activity” means
• Examples from Percentage Holdings
• Dedicated Investment Team Members (those
holding a Series 3 license)
• Number of Trades
• % of absolute value of gains and losses generated
50
Other Investment Fund
Considerations for RICs
 Regulated Investment Companies registered
under the 1940 Act and electing to be taxed as
RICs under Subchapter M.
 90% of its gross income must be “Qualifying Income”
under IRC Section 851(b)(2).
 Asset diversification test
 Year-end distribution obligation to distribute 90% of its
realized taxable income for the taxable year
51
Other Investment Fund
Considerations for RICs
Qualifying Income: 90% of a RIC’s gross
income must be derived annually from the
qualifying income sources enumerated in
IRC Section 851(b)(2).
– Notably absent from the list are income and
gains on commodities
– Commodities are not “securities” under
2(a)(36) of the 1940 Act
52
Other Investment Fund
Considerations for RICs
Growing Use of Commodities for Liquid
Alternative Strategies
– Use of offshore subsidiary blockers
• CFC, Subpart F Income will be includable in gross
income of the RIC
• So long as currently distributed, it will be Qualifying
Income
• Limited to 25% of total asset value as of the end of
each quarter of each tax year (includes assets held
as collateral for derivative positions).
53
Other Investment Fund
Considerations for RICs
– Use of Commodity-Linked Notes (CLNs)
• RIC pays issuer par value upon purchase, and
receives par value back from issuer at maturity,
adjusted up or down by the product of (1) par
value, (2) change in value of a commodity index,
and (3) a leverage factor not to exceed three.
• Additional debt-like features
– Interest payments
– Early redemption feature for principal protection
– No more than three year maturity
• Status as a “security” somewhat unclear, but it is
the basis of status as qualifying income
54
Recently Proposed Rules for
RICs holding MLPs
 In recent years, MLPs have grown in popularity
as an investment because of their yield.
55
Recently Proposed Rules for
RICs holding MLPs
 Closed-end Funds and Open-End Funds have
been launched to invest a significant portion of
their portfolios in MLPs. Many of these funds
are structured as RICs; some are structured as
C corporations.
56
Recently Proposed Rules for
RICs holding MLPs
 For those that are RICs, under Section
851(b)(3)(B), to qualify as a RIC, a fund must
have not more than 25% of its total assets in
qualified publicly traded partnerships (as defined
in Section 851(h)). This is part of the “asset
diversification test.”
57
Recently Proposed Rules for
RICs holding MLPs
 Some industry participants structured as RICs
used a subsidiary C corporation to increase
exposure to MLPs above the 25%.
58
Recently Proposed Rules for
RICs holding MLPs
 On August 2, 2013, the Service proposed
regulations under Section 851(c) regarding the
definition of a “controlled group” for purposes of
the asset diversification test, to provide a “look
through” for the investments of subsidiary C
corporations.
59
Recently Proposed Rules for
RICs holding MLPs
Public hearing scheduled for December 9,
2013.
60
Side Letter Practice Among
Institutional Investors
 Requirement for Legal Opinions
 Delaware law corporate opinion covering due
authorization and enforceability of the side letter
 Rubber hits the road on fiduciary issues
 Tax opinion as to partnership status
 Rubber hits the road on 7704 PTP safe harbors
 FIN 48 interplay on tax positions taken at fund level
61
Side Letter Practice Among
Institutional Investors
Transparency into fund portfolio
– More sophisticated risk management
protocols require real time information
– Issues with other investors
– Provide all investors with same information
– Use of aggregation services
62
Side Letter Practice Among
Institutional Investors
 Accelerated or Enhanced Liquidity/Withdrawal
Rights
 Issues for other investors: the GP’s fiduciary
responsibilities
 If registered under the Advisers Act, the GP has
additional fiduciary obligations
63
Side Letter Practice Among
Institutional Investors
 Most Favored Nation clauses (MFNs)
 Regulatory risk – implement a compliance policy and
appoint someone responsible for overseeing MFN
compliance
 Carve-outs




Founders, manager and affiliates and employees
By dollar amount invested
By regulatory conditions
Provide summary with identifying information omitted, to
protect privacy
 Take the bitter with the sweet – no cherry-picking!
64
Side Letter Practice Among
Institutional Investors
 Other Provisions:
 Non-US Withholding Taxes and Tax Filings
 Listed Transactions and Prohibited Reportable
Transactions
 Notice Provisions (disparate informational concerns)
 Key Person Provisions (disparate informational
concerns)
 Indemnification Limitations (esp. gov’t and ERISA
plans)
 Jurisdictional issues (esp. gov’t plans)
 Confidentiality/Public Records Issues
65
1940 Act Considerations
 3(c)(1) Funds – Not more than 100 beneficial
owners and not making or presently proposing
to make a public offering (all accredited
investors under Reg D is the norm)
 Non-integration for taxable and tax-exempt parallel
funds
 Look-through for owners of 10% or more of a 3(c)(1)
fund’s voting securities
 Look-through for entities “formed for the purpose of”
investing in a 3(c)(1) fund, 40% test
 General solicitation under new Rule 506(d) passed
under the JOBS Act permissible
66
1940 Act Considerations
3(c)(7) Funds – up to 1999 record holders
under 1934 Act
– All investors must be “qualified purchasers”
– QP status for individuals means $5 mm in
investments
– For entities, $25 mm in investments
– Same private placement requirement as
3(c)(1) funds
• All accredited investor offerings are the norm
67
1933 Act Considerations
Per the above, all 1940 Act exemptions
require an exemption from the registration
requirements of the 1933 Act
Rule 506 of Regulation D
Federal Covered Security status under
NSMIA
Blue Sky “notice” filings and fees
– More aggressive state regulators
68
Investment Advisers Act of 1940
Considerations
Registration of the Manager
– $100 mm AUM threshold for SEC registration
generally
– $150 mm AUM threshold for private fund
advisers (exempt reporting adviser status)
– State regulation
Performance Fees can only be charged to
“Qualified Clients”
69
Investment Advisers Act of 1940
Considerations
 Exemption for Advisers to Venture Capital Funds
– 80% qualifying investments in equity securities issued by
qualifying portfolio company
• Must be an operating company
• Does not incur leverage for fund’s investment
• Not a reporting or foreign traded company
– Limitation on fund-level leverage – 15%
• Any such leverage is for a non-renewable term not longer than 120 days
– No redemptions by investors
– Venture capital strategy representation
– Private fund status (not registered as an investment company or
BDC)
70
Investment Advisers Act of 1940
Considerations
With regulatory burdens come
opportunities…
– Attracting institutional money
71
Commodity Exchange Act
Recent changes post-Dodd Frank
eliminated Rule 4.13(a)(4), which was an
exemption from CPO registration for pools
offered to highly sophisticated investors
Rule 4.13(a)(3) exemption still available,
but more limited, available to managers of
private funds
– Aggregate initial margin does not exceed 5%
– Aggregate net notional exposure does not
exceed 100%
72
Commodity Exchange Act
4.13(a)(3) – sales only to Qualified Eligible
Persons (QPs automatically qualify)
Many managers implementing quantitative
strategies must register as CPOs and
CTAs
73
Broker/Dealer Registration Requirements
under the 1934 Act for PE Fund Managers
 1934 Act Section 15(a)(1) prohibits any person
from effecting transactions in, or inducing or
attempting to induce the purchase or sale of, any
security, unless that person is registered as a
broker
 Section 3(a)(4)(2) defines a broker as any
person engaged in the business of effecting
transactions in securities for the account of
others
74
Broker/Dealer Registration Requirements
under the 1934 Act for PE Fund Managers
Key Factors
– Participant in key parts of transaction
– Prior experience in securities transactions
– Disciplinary issues
– Handling of funds or securities
– TRANSACTION-BASED COMPENSATION
75
Broker/Dealer Registration Requirements
under the 1934 Act for PE Fund Managers
 David W. Blass, Chief Counsel, Division of
Trading and Markets, SEC, Speech on April 5,
2013 to the ABA Trading and Markets
Subcommittee: A Few Observations on the
Private Funds Space.
76
Broker/Dealer Registration Requirements
under the 1934 Act for PE Fund Managers
Very limited applicability of the issuer
exemption in 1934 Act Rule 3a4-1.
– Generally applicable to an operating company
personnel of which only occasionally engage
in securities sales (no more than once every
12 months)
– Personnel must regularly perform substantial
duties not related to sales of securities
– No transaction-based compensation
77
Broker/Dealer Registration Requirements
under the 1934 Act for PE Fund Managers
 Transaction-based compensation is important,
but…if issuer personnel are regularly engaged in
broker/dealer activity, broker/dealer registration
may be triggered
 Continuous capital raising activities
 Internal marketing personnel had better be
registered reps of a broker/dealer
 Private Placements: where is the broker/dealer?
78
Broker/Dealer Registration Requirements
under the 1934 Act for PE Fund Managers
 Compliance Point: How certain fees are booked
 “commissions” and “sales charges” appearing on the
G/L need to be paid to a broker/dealer
 SEC specifically asks for accounting records in its
examinations
 Internal protocols to vet and document the status of
payees as broker/dealers should be implemented
 Payment to an unregistered broker/dealer blows the
Blue Sky exemption, opens the issuer to rescission
liability
79
Broker/Dealer Registration Requirements
under the 1934 Act for PE Fund Managers
 Other PE fund and manager activities
 Investment banking or brokerage activities for PE
fund portfolio companies
 Fees charged for sales or financings executed for
portfolio companies
80
Chamberlain Hrdlicka
Financial Services Practice Areas
Asset Management.
Chamberlain Hrdlicka’s asset
management attorneys’ experience spans multiple industries and asset
classes. We routinely advise our clients on regulatory aspects of fund
management and investment advisory operations. Our asset management
team provides legal services to a wide range of clients in the asset
management industry including registered and unregistered investment
advisers, broker-dealers, corporate entities with multiple subsidiaries,
publicly offered closed-end funds and mutual funds, private investment
funds, and asset and wealth management firms, trust companies as well as
other organizations with various fiduciary responsibilities. Our practice
includes the formation and representation of investment companies,
sponsors, advisers and directors, including SEC and FINRA regulatory
compliance matters; fund formation, distribution and marketing; fund board
and governance matters; compliance manuals and testing; and corporate
transactions involving asset management businesses, including mergers,
acquisitions and joint ventures.
81
Chamberlain Hrdlicka
Financial Services Practice Areas
Broker/Dealers
 The attorneys at Chamberlain Hrdlicka routinely counsel broker-dealer
clients on a broad range of legal issues:
–
–
–
–
Dodd-Frank and other financial institution regulatory reform
Regulatory, compliance and securities law matters relating to broker-dealers
Advise broker-dealers on the rules of the SEC, FINRA and other regulatory and selfregulatory organizations
Registration requirements, including with regard to unregistered affiliates of registered
broker-dealers that wish to engage in securities-related activities
 Our clients include a broad range of broker-dealers, as well as their nonbroker-dealer subsidiaries and affiliates. We also serve small and mid-sized
firms, and affiliates of insurance, commercial banking and other financial
services companies. Chamberlain Hrdlicka also provides its broker-dealer
clients with a full range of corporate, securities, M&A, tax and other advice
in connection with their investment banking activities.
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Chamberlain Hrdlicka
Financial Services Practice Areas
ERISA/Benefit Plan Investors
Review transactions with ERISA plan investors (401k plans, pension
plans including Taft-Hartley plans, Keogh plans, IRAs, etc.) in
pooled investment funds managed by private fund managers for
compliance with applicable ERISA requirements including fiduciary
responsibility, QPAM status, plan assets rule, prohibited transactions
and exemptions therefrom. Advise on fund offering documents
for provisions that address both ERISA plan investors and plan
investors other than ERISA plan investors, such as US state and
local government and foreign pension plans.
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Chamberlain Hrdlicka
Financial Services Practice Areas
Family Office
The attorneys at Chamberlain Hrdlicka understand the
nature of representing wealthy individuals and their
families. Our Family Office attorneys are very
knowledgeable in not only establishing, but sustaining a
Family Office for future generations. We can offer our
clients an array of services which include, but are not
limited to, investment management regulation and
compliance, income, estate and gift tax planning, business
succession planning, as well as legal aspects of
management of closely-held businesses through a Family
Office.
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Chamberlain Hrdlicka
Financial Services Practice Areas
Financial Services
Chamberlain Hrdlicka’s financial services team is equipped
to handle the ever-changing landscape of the financial
sector and help our clients reach their business
objectives. Our sophisticated financial services practice
includes work in many areas of the industry, including
mergers and acquisitions, asset management, capital
market activities, product development and compliance,
federal and state securities and domestic and offshore
company formation. Chamberlain Hrdlicka routinely
counsels their clients on matters regarding regulatory
initiatives and legislation, as well as privacy law
compliance.
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Chamberlain Hrdlicka
Financial Services Practice Areas
Hedge Funds
Chamberlain Hrdlicka understands sophisticated private managers
need legal advisers with a level of knowledge and understanding of
complex investment strategies that can support such sophistication.
Our hedge fund attorneys have experience working with managers with
many different fund styles, from single-strategy to multi-strategy hedge
funds and funds of hedge funds. Chamberlain Hrdlicka assists clients
throughout all stages of hedge fund development, providing counsel on
the establishment and operation of hedge funds, including the
preparation of fund formation documents and private placement
memoranda. Chamberlain Hrdlicka’s hedge fund practice is dedicated
to providing our clients with a partner to help assess and manage legal
risk so they can focus on maximizing return.
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Chamberlain Hrdlicka
Financial Services Practice Areas
Investment Advisors
Chamberlain Hrdlicka attorneys advise clients in all aspects of
their investment advisory business, including both retail and
institutional advisory businesses. We counsel our investment
adviser clients on the formation and operation of many types
of alternative investment vehicles, including hedge funds,
fund-of-funds, venture capital and private equity funds, private
real assets funds and other public and private pooled
investment vehicles. We also advise our clients on the
complex federal and state regulatory, legal and compliance
issues affecting investment advisers and their affiliates,
including pay-to-play rules and lobbyist registration
compliance matters.
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Chamberlain Hrdlicka
Financial Services Practice Areas
Investment Management
Chamberlain Hrdlicka’s investment management team provides a full
range of legal, regulatory and advisory services including business
formation, governance issues, transactions, registration, documentation
and agreements, operational matters, and other corporate
matters. We are able to advise our clients through each stage of
investment maturation, assisting clients from fund formation and
management to distribution arrangements with financial
intermediaries. Our clients include mutual funds, closed-end funds,
domestic and offshore private investment funds (including venture
capital, private equity, and hedge funds), investment advisers, and
broker-dealers.
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Chamberlain Hrdlicka
Financial Services Practice Areas
Private Equity Funds
Chamberlain Hrdlicka’s private equity attorneys can advise
clients throughout the life cycle of a private equity
transaction, from formation, to investments and ultimately
to exit. We have expertise and experience in sophisticated
transactions including leveraged buyouts, management
buyouts, spin-offs, venture capital financings, going-private
transactions, and recapitalizations and dispositions, as well
as cross-border and international transactions.
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Chamberlain Hrdlicka
Financial Services Practice Areas
Private Funds
Chamberlain Hrdlicka’s Corporate, Securities & Finance practice group
includes a team of attorneys who are well-versed in all legal and
regulatory matters relevant to managing and investing in private funds.
Our experience across many private fund structures, including private
investment funds, hedge funds and private equity funds, enables us to
assist clients in a wide scope of fund investment activities.
We help our clients move forward with private fund activities, employing
a cross-disciplinary approach that incorporates the firm’s greater
Corporate, Securities & Finance practice, along with other relevant
practice areas including tax and tax planning. At any juncture in private
fund operations, from fund formation to ongoing fund management, our
team can navigate the legal, regulatory and compliance and
governance matters, advancing for our clients the diverse objectives of
both fund sponsors and investors.
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Chamberlain Hrdlicka
Financial Services Practice Areas
Wealth Management
Chamberlain Hrdlicka’s attorneys routinely counsel our
financial services industry clients on their wealth
management businesses. We understand wealth
management represents the intersection of many
disciplines, from investment advisory, broker/dealer, family
office and tax and estate planning, to international tax and
cross-border planning. Our strength in the tax and
international tax areas also provides additional support to
our clients with wealth management businesses.
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Jonathan W. DePriest
 Jonathan DePriest maintains a sophisticated mergers and acquisitions practice, with
an emphasis on investment management and financial services industries and asset
management and wealth management firms, as well as private pooled investment
vehicles (such as hedge funds and private equity funds). Mr. DePriest has
successfully concluded over $2 billion in merger and acquisition transactions, drawing
also upon the Firm’s strength in the tax field to provide sophisticated analysis and
support in structuring transactions.
 Mr. DePriest also counsels asset management clients in launching and managing
private pooled investment vehicles, and serves as counsel to the adviser for
regulated investment companies. Mr. DePriest has assisted in launching private
investment funds that currently manage over $7 billion in assets. These funds have
comprised diversified multi-asset class, multi-strategy funds of funds as well as
single-strategy hedge funds, liquid alternatives funds, registered and regulated
investment companies, and alternative investments such as timber, private energy
and private equity.
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Chamberlain Hrdlicka White
Williams & Aughtry
Atlanta
Denver
Houston
Philadelphia
San Antonio
[email protected]
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