The starting point for any compliance program is to determine what you are trying to comply with. Every company has some legal requirements or contractual requirements that govern how it operates its business. Every company will place different emphasis on which of those requirements it will put under its compliance program. Every company will operate its compliance program differently.
Within the private fund industry, the most significant law will be the Investment Advisers Act. The anti-fraud provisions apply, whether the fund manager is registered or not. If the fund manager is registered, then there is another set of requirements. Since those requirements are largely principles based, it’s up to each fund manager to craft its compliance program based on the firm’s operations.
For private funds, the fund documents will be the most significant contractual requirement. The combination of the private placement memorandum and limited partnership agreement will govern fund operations. Each fund manager has crafted those documents with different provisions, so the compliance provisions will change from manager to manager.
If the private fund has overseas investors or operations, then the Foreign Corrupt Practice Act will come into the compliance program. Not because it’s the most important, but because it has been grabbing the headlines.
Overseas operations or investors will also bring the Foreign Account Tax Compliance Act into play. That means jumping through hoops with the Internal Revenue Service for overseas accounts and overseas investors.
The list will go on and on and on as you look at more and more laws.
And the end of the day, you want to be able to say you are compliant. But it still leaves the question: compliant with what?