Regulatory And Litigation Hot Topics For Private Funds In 2016

Private investment funds are likely to face increased regulatory scrutiny and litigation risk in 2016, not only based on the Securities and Exchange Commission's focus on the industry but also due to transparency and compliance initiatives of limited partners and other market developments. We have highlighted several areas that should be on the top of every private fund sponsor's list – and how to assess and manage the associated risks.

Fees and Expenses

Fees and expenses will continue to be a top enforcement priority for the SEC in 2016. The SEC has challenged sponsors' practices of allocating certain fees and expenses to the funds they manage, such as overhead costs and broken deal expenses where there were potential co-investors, unless such costs and expenses were adequately disclosed in the LPAs and/or offering documents. The critical issue is whether the challenged fee/expense was adequately disclosed to investors at the time of the investment decision, which