President's working group committee reports weigh in on side letters
Abstract
Purpose
The purpose of this paper is to analyze disclosure issues relating to side letters between funds and individual investors or groups of investors, as discussed in recent reports by the Investors' Committee and the Asset Managers' Committee of the US President's Working Group on Financial Markets.
Design/methodology/approach
The paper addresses criteria regarding the types of terms in side letters that should be disclosed to all investors, the manager's fiduciary duties to investors in a fund, and practical considerations as to whether various types of benefits should be offered to an individual investor or group of investors or rather offered to all investors by amending a fund's documents.
Findings
To satisfy its fiduciary duties, a manager should ensure that the fund documents accurately reflect the material terms relating to the fund and that generally side letters should not materially alter those terms without adequate disclosure to all investors. Terms that could adversely impact on other investors include those related to control rights, preferential liquidity rights, preferential fees, and material alterations of the investment program.
Originality/value
The paper is a useful interpretation of Working Group Guidelines by experienced securities lawyers.
Keywords
Citation
Ohayon, L.J. and Lee, T.H. (2008), "President's working group committee reports weigh in on side letters", Journal of Investment Compliance, Vol. 9 No. 4, pp. 39-41. https://doi.org/10.1108/15285810810922251
Publisher
:Emerald Group Publishing Limited
Copyright © 2008, Emerald Group Publishing Limited