Category: Private Equity

Mary Beth Kerrigan On Venture-Backed M&A Encore Panel

Back by popular demand, corporate partner Mary Beth Kerrigan was a panelist at an encore panel of this year’s ABA Business Law Annual Meeting in Boston. Mary Beth discussed complex issues that arise in acquisitions of venture-backed companies. M0846587

The webinar included varying topics, including disproportionate allocation of indemnity risk among stockholders/stakeholders, complex waterfalls, and much more. Congratulations to Mary Beth on another job well done!

To learn more about the conference, visit the ABA’s event page.

Scott Bleier Presenting at ABA Business Law Annual Meeting

MBBP Corporate Partner Scott Bleier will participate in two separate sessions during this year’s ABA Business Law Annual Meeting in Boston.  Scott will be discussing the recent Sun Capital Partners III v. New England Teamsters & Trucking Industry Pension Fund (D. Mass. March 28, 2016) court case at the Private Equity and Venture Capital Jurisprudence meeting on Friday, September 9th.  Additionally, later that day he will be leading a presentation of the Venture Capital Transactional Documents and Issues Subcommittee regarding various alternative approaches to financing start-up companies, including SAFEs and KISSs.M0846500

This year’s meeting includes panels with diverse subject matters, as well as numerous networking opportunities.  In addition to Scott’s role, Corporate Partners Mary Beth Kerrigan and Jon Gworek will also take part in the conference.  Mary Beth will be a panelist on the panel “Venture-Backed M&A: Special Considerations“, while Jon Gworek will conclude his tenure as Chair of the Private Equity and Venture Capital Committee.

To learn more about the conference, view the ABA’s event page.

Private Equity Firms as Investment Advisors & The Custody Rule

Corproate By: Mark Tarallo 

As a result of changes brought about by the Dodd-Frank Act, many private equity firms are now required to register as investment advisers in connection with their activities.  Once registered as an investment adviser, private equity firms are subject to the rules and regulations generally applicable to investment advisers.  One such rule is the “Custody Rule,” Rule 206(4)-2, promulgated under Section 206(4) of the Investment Advisers Act.  The Custody Rule requires advisers, who have custody of client assets, to adopt procedural safeguards to prevent loss, misuse or misappropriation of those assets.  The Custody Rule frequently comes into play with private equity firms when those firms use special purpose vehicles (SPVs) for acquisitions, or where private equity firms are responsible for maintaining a post-transaction escrow, or serve as the “sellers’ representative”.  Since registering as investment advisors, many private equity firms did not contemplate that they would be required to comply with requirements like the Custody Rule, and very few of them had procedural safeguards consistent with the Custody Rule in place.  In response, the SEC has granted limited relief from full compliance with the Custody Rule, such relief requiring, in part, that the fund manager distribute audited financial statements to all beneficial owners of the private equity fund within 120 days of the fiscal year-end of the fund, or within 180 days of the fiscal year-end for a fund of funds.


On October 29, 2014, the SEC announced that it had filed charges against a registered investment advisor for failing to timely deliver audited financial statements to its investors, thereby violating the provisions of the Custody Rule.  The SEC sought a cease-and-desist order against the operators of the fund, noting that such an action was necessary to protect investor interests due to repeated failures by the fund to deliver the required audited financial statements.  Private equity firms that use SPVs in transactions or that act as a seller representative post-closing should clearly understand their compliance obligations, and what deliveries are required by them to investors, in order to avoid similar claims from the SEC.


Feel free to contact Mark with any questions on this topic.