In the Law360 article “Why PE Clients Must Evolve Their Disclosure Practices,” Morrison & Foerster’s Global Private Equity Investments & Buyouts co-head Todd Boudreau explains how a private equity firm can avoid SEC inquiries into its disclosure practices.
"As long as firms are disclosing what they need to disclose, making sure they're transparent as can be and following the agreements in place, then those types of issues shouldn't be a problem," said Todd. "This can get complicated quickly when you have multiple side letters and funds."
Law firms that lack the resources to handle everything that comes with complicated disclosure practices should consider using a third-party back office administrator to help monitor things like management fee offsets, broken deal fees and allocating cost among funds, Todd said. In truth, a PE client's disclosure practices, and its ability to back up the legitimacy of that disclosure, should be plain and clear to the limited partner base. When things become unclear, problems can arise.