Doug Cornelius on compliance for private equity real estate
I’m off to sunny Scottsdale to attend my first NRS Fall Compliance Conference. If you are also attending, try to find me and I’ll buy you a cup of coffee (or at least head to the coffee urn with you).
I’m speaking on Wednesday afternoon on Issues in Private Fund Management with John Walsh, from Sutherland, and Mederic Daigneault, from NRS. It should be a good panel.
I’ll try posting my notes from some the panels during the conference.
I’m trying out a new compliance conference this fall: the NRS 29th Annual Fall Investment Adviser & Broker-Dealer Compliance Conference.
I have to admit that I’m attending mostly because they asked me to speak. My session is on Issues on Private Fund Management on Day Two.
One of the challenges of staying up-to-date on compliance is learning about the new requirements as they come into effect. The second challenge is learning how your peers are interpreting the new requirements and putting them into effect at their organiztions. A compliance conference is a great way help with both of those challenges.
The NRS Conference is tied to my designation as an Investment Adviser Certified Compliance Professional. NRS is the organization that runs the certification program. With the designation comes continuing education requirements. (I have met most of my requirements at non-NRS events.) Attending the conference will help also help me finish off my requirements for the year.
On May 6 and May 7, I’ll be in New York for PEI’s Private Fund Compliance Forum. Let me know if you’ll be there.
If you haven’t signed up yet, PEI was nice enough to offer a 15% discount to readers of Compliance Building. Use the promo code PFC14_CB.
Agenda
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I spent most of yesterday in New York at PERE’s CFO Forum. I came to speak about the evolution and revolution of regulation in the private equity real estate industry. I thought I would share a few items.
The opening panel focused on the changing role of the Chief Financial Officer. A big change is the avalanche of regulations and business requirements. Compliance is expensive when you add together the direct costs, the indirect costs, and the lost opportunity costs. It’s a cost of doing business.
Fund managers are fiduciaries. Exceed your investors expectations.
There is the rise of the new “F” words: FATCA, FIRPTA, FBAR, and FCPA.
The second panel focused on valuations. They put forth three items to focus on during valuations: consistency, transparency, and independence. You should have a consistency in the process, regardless of product type or geography.
Transparency allows someone to see good work product to get to the final fair value. As with third grade math, it’s not just about getting the right answer, it’s also about showing your work.
Independence is important to show that the decision makers are not influenced by other factors in trying to reach fair value. A person compensated based on an increase in fair value should not sit on the valuation committee.
As markets recovered from the 2008 financial panic we entered an era of price discovery. Nobody was quite sure where pricing would be post-crisis. With rising interest rates, we may be entering a new phase of price discovery.
The third panel was on tax reform and tax policy developments. There is a general sense in Washington that there could be a major tax code reform. As a result some changes are being held up based on the possibility of becoming part of a larger piece of legislation.
My panel was on regulation: evolution or revolution for real estate.
According to some informal polls, most of the audience had registered last year as a result of Dodd-Frank. A few had been registered prior and a few were not registered.
As much as we are dealing with dramatic changes in the regulatory environment, the Securities and Exchange Commission is dealing with a dramatic change in their oversight of investment advisers. Dodd-Frank moved thousands of small retail investment advisers from the SEC to state registration. In exchange, the SEC got lots more hedge fund, private equity funds, and real estate funds. The SEC has as much to learn about private fund operations as we do to learn about SEC oversight.
These are the speaking notes from this session at PEI’s Private Fund Compliance Forum 2012.
Panelists:
Audience Polls
I’m attending Private Equity International’s Private Fund Compliance Forum. This is the third edition of forum. Last year focused on the steps leading up to registration with SEC as an investment adviser. This year, the forum is supposed to focus on what to expect in the first year of SEC registration and beyond.
I’m part of a session on Wednesday morning and another on Thursday afternoon. If you are one of the 200 or so attendees, stop me and say hello.
I may try to turn some of my notes from the sessions into blog posts.
| Day One: Wednesday, May 2, 2012 |
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| 8:45 – 9:00 | PEI welcome & Chairman’s introduction | |||
| 9:00 – 10:00 |
Expert panel: Post-registration update: Where are we now?
• Adjusting to the evolving role of a CCO Moderator: Roman A. Bejger, Chief Compliance Officer, Providence Equity Partners L.L.C. |
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| 10:00 – 10:30 |
A view from the SEC
This session will provide you with in-depth analysis of how the SEC is dealing with new registrants. SEC officials will answer your most pressing questions to help you ensure an efficient compliance program.Carlo V. di Florio, Director, United States Securities and Exchange Commission, Office of Compliance Inspections and Examinations Interviewed by Nicholas Donato, Editor, Private Equity Manager |
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| 10:30 – 11:00 | Networking Coffee Break | |||
| 11:00 – 11:50 |
Best practices for addressing anti-corruption issues • How are the SEC and the DOJ handling recent anti-corruption cases? • UK Bribery Act – How will it apply to US foreign offices? – What impact will it have on entertaining requirements • FCPA – Knowing who you’re doing business with? – Handling the increased due diligence requirements • AML – What to expect when they go into effect Moderator: Douglas N. Greenburg, Partner & Vice Chair of the Global Litigation Department, Latham & Watkins LLP |
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| 11:50 – 12:50 | Update on the new regulations and how they will impact you going forward• How will new Treasury Department requirements impact the private funds community? • Dissecting the Volker Rule • How the evolving landscape will impact the PE community in the years ahead Moderator: Karen Barr, General Counsel, Investment Adviser Association |
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| 12:50 – 2:15 | Networking luncheon | |||
| 2:15 – 3:00 | Improving your compliance program through the use of technologyModerator: Graham Winfrey, Staff Writer, PEI Media Panel Members: Jeff Faber, Chief Financial Officer, Trafelet & Company, LLC Stephen Marsh, Founder & CEO, Smarsh Scott Ring, General Counsel, Bessemer Venture Partners |
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| 3:00 – 3:45 |
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| 3:45 – 4:00 | Networking refreshments break | |||
| 4:00 – 5:00 | Mock Audit: Successfully maneuvering your way through an SEC exam
• What is the SEC looking for? |
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| 5:00 – 6:30 | Cocktail Reception and end of Day One |
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| Day Two: Thursday, May 3, 2012 | |||
| 8:30 – 8:45 |
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| 8:50 – 9:00 | Chairman’s welcome | ||
| 9:00 – 9:30 |
Keynote interview – Working with the SEC H. David Kotz, former Inspector General, Office of the Inspector General, United States Securities and Exchange Commission (2007-2012), currently Managing Director, Gryphon Strategies Interviewed by Lois Towers, Principal, Pantheon Ventures |
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| 9:30 – 10:10 | Conducting an effective annual review
• What does the SEC want you to look at? Moderator: |
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| 10:10 – 11:00 | Insider trading and restricted lists
• Why every fund needs to have a restricted list? Moderator: John Sampson, Senior Executive, Ernst & Young LLP |
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| 11:00 – 11:15 | Coffee Break | ||
| 11:15 – 12:15 | A new era of fundraising and marketing • Assessing what rules apply and how they are applicable to your firm • Effectively displaying performance: How do you display performance data in your advertising? • Gaining pre-clearance for political contributions • When and where you can advertise? • Best practices for addressing gifts and entertainment • Reporting and pre-clearance obligations for personal trading • How should you be reporting performance: net vs gross • How state and local lobbying laws are impacting your office Panel Members: Julia D. Corelli, Partner, Pepper Hamilton LLP Kurt A. Krieger, Legal Director, Huntsman Gay Global Capital, LLC Jason Ment, Partner, General Counsel & Chief Compliance Officer, StepStone Group LLC Helane L. Morrison, General Counsel & Chief Compliance Officer, Hall Capital Partners LLC |
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| 12:15 – 12:20 | Closing remarks | ||
| 12:20 – 1:20 | Closing Luncheon | ||
| 12:30 – 3:30 | Master Class: Effectively updating and maintaining your compliance programNow that the registration deadline is a thing of the past, many in the private funds compliance community are wondering what’s next. With greater requirements, comes greater responsibility. The maintenance and updating of compliance policies and procedures are vital to the success of every compliance program.
This master class will provide and in-depth overview of how to create and implement a successful and efficient compliance program from start to finish. Nuts & bolts of putting together a compliance program Effective recordkeeping Ensuring compliance |
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I’m once again speaking at the Enterprise 2.0 Conference.
Social Media & Social Networking: Some Cautionary Tales (Location: Room 312)
Social media (Twitter, LinkedIn) and enterprise social networking solutions (profiles, activity streams, social analytics) can deliver compelling business value. However, benefits do not come without risks. This panel discussion with experts and practitioners will provide insight as to the policy, governance, and security issues warranted to mitigate risks.
Moderator – Mike Gotta, Senior Technical Solution Marketing Manager for Enterprise Social Software, Cisco
Panelist – Julie LeMoine, Enterprise Collaboration, Innovation Expert
Panelist – Doug Cornelius, Chief Compliance Officer, Beacon Capital Partners LLC
Panelist – Stew Sutton, Principal Scientist, Knowledge Management, The Aerospace Corporation
Panelist – Suzanne McGann, Social Media Program Manager, Global Interactive Strategy, Medtronic
The session is Tuesday afternoon, 2:30 to 3:30 in Room 312 at the Hynes Convention Center. Stop by if you can.
Thousands of private equity firms are scrambling to meet the July deadline to register with the SEC. New disclosure rules are being proposed for private equity managers with more than $1bn in assets. PEI Media is producing its second annual PEI Private Fund Compliance Forum 2011 to help prepare you prepare for the new wave of regulations.
I will be speaking on a panel on the new rules governing fundraising. Here is the rest of the agenda:
Day One: Wednesday, May 3, 2011
8:50 – 9:00
PEI welcome & Chairman’s introduction
9:00 – 10:00
Expert panel: Brave new world – Impact of SEC registration on finance and operations
– Creating a culture of compliance
– Getting buy-in from the GPs and other key stakeholders
– What does it mean to take on the role of a Chief Compliance Officer?
– Defining the function for your organization
– Budgeting for staff, outside consultants, technology
– Who do you appoint to be the CCO – CFO, GC or COO?
10:00 – 10:30
Keynote Speaker
Carlo V. di Florio, Director, United States Securities and Exchange Commission, Office of Compliance Inspections and Examinations
10:30 – 10:50
Networking break
10:50 – 12:00
Panel: The new form ADV 2 part 2
– Most important required elements for the brochure
– Addressing the most challenges aspects i.e. confidential information and fees
– Handling updates and brochure supplements
– Effective delivery
12:00 – 1:00
Panel: CCO Clinic
What does it take to be an effective chief compliance officer?
1:00 – 2:15
Luncheon
2:15 – 3:15 – Workshop Session I
Workshop A: For new SEC registrants
– What to expect during the first year as a RIA
– ADV I and II forms
– Formalizing the code of ethics
– Custody rule compliance
Workshop B: For multi-strategy PE firms and hedge fund affiliates
– Whether or not to have information barriers
– What types of controls need to be put in place
– How do you prevent the misuse of information
– Conflicts of interest
– Flows of information
3:15 – 3:30
Refreshments
3:30 – 4:30 – Workshop Session II
Workshop C: Stepping up your internal compliance program
– Creating a firm compliance manual and training your staff
– Administering the terms of the limited partnership agreement
– Building a risk matrix and conducting an annual review
– Identifying risks; conflicts and fees
Workshop D: International Tax issues
– Recent tax changes and new regulatory frameworks in China, Australia, South Korea, India
– FATCA
– How do these changes impact returns?
– Modifying fund structures for tax efficiency
4:30- 5:30
Panel: What to do when the SEC knocks on your door?
– SEC hot buttons in an audit
– Disclosure issues
– Top 10 deficiencies for private funds
5:30 – 7:00
Cocktail Reception
Day Two: Thursday May 4, 2011
8:50 – 9:00
Chairman’s welcome
9:00 – 9:50
Panel: Update from Washington
– Hedge Fund Transparency Act
– Regulation of venture capital firms
– New initiatives on the horizon
9:50 – 10:35
Panel: The new due diligence regime – meeting requirements from LPs and regulators
– Presentation and documentation of track record
– Monitoring of trading activities
– Increased scrutiny around valuation
– Importance of integrity of reporting
– Compensation of operating partners
10:35 – 10:55
Coffee break
10:55 – 11:45
Panel: New rules governing fundraising
– Presentation materials and being compliant
– State procurement lobbying laws and their effect on raising money from public pensions
– Monitoring your employees’ political contributions• Presentation materials and being compliant
– Coordination of global offering to US and non-US investors
– Monitoring your employees’ political contributions – prohibit vs. preclear?
11:45 – 12:40
Panel: Effective and appropriate marketing materials
– Consider your audience – presentation to existing LPs, prospective LPs and portfolio companies
– Making sure that presentations are reviewed by compliance
– Interpreting rules governing marketing and advertising
– Web sites and other marketing materials
– Guidelines regarding talking to the press
12:40-1:15
Panel: Regulatory issues beyond Dodd Frank
– FCPA and UK Bribery Act compliance
1:15 – 2:15
Closing Luncheon
On Thursday, December 2nd, 2010, I will be part of panel discussing some of the effects of the Dodd-Frank Wall Street Reform and Consumer Protection Act on real estate investment management firms.
The session is open to the public, but not free.
Panelists
John Schneider, Principal, KPMG LLP
Paul D. Schwartz, Partner, Goodwin Procter LLP
Doug Cornelius, Chief Compliance Officer, Beacon Capital Partners
Have you been Dodd-Franked?
If you invest other people’s money in real estate you may have been. The Dodd Frank legislation’s impact on real estate investment managers is far reaching and evolving. Our panel of experts will discuss the legislation and answer these key questions:
Thursday, December 2nd, 2010
Wilmer Cutler Pickering Hale & Dorr LLP
60 State Street, 26th Floor, Boston
Registration 7:30 a.m.; Program 8:00 – 9:30 a.m.
Cost: $50 REFA Member | $80 Non-member
Members Register Online | Faxable Registration Form | **72 HOUR CANCELLATION POLICY**
Questions? Please call Kayla Burmeister at 617-399-7863
