Tax and Business Related Considerations for Private Equity and Other Investment Funds

1
Tax and Business Related Considerations for
Private Equity and Other Investment Funds

• Jonathan W. DePriest
• Chamberlain, Hrdlicka, White, Williams Aughtry
• Tax Executive Institute Denver Chapter
• Federal Tax Day December 10, 2013

2
Basic Structures PE Funds

• Structure of the PE fund itself will depend upon
  the nature of its investors
• US domestic taxable
• US domestic tax-exempt
• Foreign (and from which jurisdictions)
• AND the nature of its target (investee) portfolio
  companies
• Foreign/Non-US
• Domestic C Corporation
• Domestic Partnership

3
Basic Structures for PE Funds
Principals/ Individuals
Non-U.S. Investors
Certain Non-U.S. Investors, and U.S. Investors
Manager Partnership or S Corporation
Management G.P.
Feeder Corporation (Non-U.S.)
x and carried interest
Partnership
Fee for management services
Target Investments
4
Basic Structures for PE Funds

• Investor Tax Issues
• Non-US Investors
• Avoid ECI
• Avoid FIRPTA
• Avoid filing US returns
• Results often in using a foreign blocker
  usually organized in a tax haven jurisdiction
• Parallel and co-investment structures often
  necessary

5
Basic Structures for PE Funds

• Investor Tax Issues Continued
• US domestic taxable investors
• PE fund itself should not bear tax
• Pass-through of capital gains and losses
• Minimization of phantom income
• No reporting obligations or tax payment
  obligations in non-US jurisdictions (or if
  incurred, ability to use foreign tax credit)
• Avoid investing in CFCs (parallel foreign
  partnership structure for non-US investments)

6
Basic Structures for PE Funds

• Investor Tax Issues Continued
• US domestic tax-exempt investors
• Avoid investments in operating partnerships
  (UBTI)
• Avoid unrelated debt-financed income (UDFI)
• Avoid fees for services (UBTI)
• Avoid certain insurance income

7
Basic Structures for PE Funds

• Use of Swaps
• Blocker companies interpose additional level of
  tax
• Use of total return swap (TRS)
• Investor puts up cash collateral for a notional
  investment, and typically pays interest on the
  notional amount (sometimes net of collateral)
• Institutional counterparty will hedge with
  investment notional amount in PE fund
• Desire for full collateralization risks
  recharacterization

8
Basic Structures for PE Funds

• Use of Swaps Continued
• Industry Director Directive (IDD) on use of TRS
  by foreign investors
• Avoids 30 withholding tax
• Likely too risky
• Use of TRS by US TEIs
• Fairly common for private funds of MLPs
• Applicable to PE funds

9
Basic Structures for PE Funds

• Management Fees and Carried Interests
• Limited partnership to receive management fees
  1 LLC general partner subject to self-employment
  tax, limited partnership exception under Section
  1402(a)(13) for LP share
• Investment entity to invest the managers capital
  commitment and receive carried interest,
  exceptions for self-employment tax under Section
  1402(a)(2) and (3)

10
Corporate vs. Partnership Structures for Target
(Investee) Portfolio Companies held by PE Funds

• Corporate is more traditional, and frankly
  presents fewer issues
• Investment by PE Fund in US domestic C
  corporation often takes the form of preferred
  stock
• Possible combination with debt

11
Corporate vs. Partnership Structures for Target
(Investee) Portfolio Companies held by PE Funds

• Typical features of Preferred Stock
• Dividends
• Liquidation Preference
• Redemption Rights
• Conversion rights and related anti-dilution
  protections

12
Corporate vs. Partnership Structures for Target
(Investee) Portfolio Companies held by PE Funds

• Preferred Stock Dividends
• Cash
• Payment-in-kind (PIK)
• Cumulative or Compounding
• When as and if declared by the Board will
  generally mean taxable upon receipt
• Automatic increase to the liquidation preference
  generally means taxable as they accrue

13
Corporate vs. Partnership Structures for Target
(Investee) Portfolio Companies held by PE Funds

• Preferred Stock Dividends
• Treatment of Preferred Stock as tax common by
  adding participating features
• Double dip participation in dividends with
  common on as-if converted basis
• Participation on liquidation of the greater of
  liquidation preference or what holder would be
  entitled to receive on as-if converted basis

14
Corporate vs. Partnership Structures for Target
(Investee) Portfolio Companies held by PE Funds

• Tax Common
• Allows deferral of tax on PIK dividend
• Avoids OID issues with redemption premium

15
Corporate vs. Partnership Structures for Target
(Investee) Portfolio Companies held by PE Funds

• Traditional LTEIPs are more easily accomplished
• Most are familiar with qualified stock options
• PE views on vesting, forfeiture, Liquidity Events
• Sale of company vs. IPO

16
Corporate vs. Partnership Structures for Target
(Investee) Portfolio Companies held by PE Funds

• Partnership is more and more prevalent among
  operating companies and their owners, and from
  the private equity funds perspective presents
  conflicts among
• U.S. domestic taxable investors
• U.S. tax-exempt investors
• Foreign investors

17
Corporate vs. Partnership Structures for Target
(Investee) Portfolio Companies held by PE Funds

• Debt Contingent Interest
• Expressed as the greater of a fixed percentage
  interest rate or contingent interest
• Contingent interest expressed as a percentage of
  adjusted gross revenue
• Not unlike the NPI discussed below
• UBIT Avoidance for TEIs

18
Corporate vs. Partnership Structures for Target
(Investee) Portfolio Companies held by PE Funds

• Preferred Equity in a Partnership
• Allocations of taxable income to support
  preferred return upon liquidation (liquidation is
  in accordance with capital accounts)
• Works well if income is growing
• Capital accounts must be reflective of the
  relative rights and preferences upon liquidation
• Getting through the waterfall

19
Corporate vs. Partnership Structures for Target
(Investee) Portfolio Companies held by PE Funds

• Can lead to unexpected results and incentives
• Amortization of goodwill for acquisitions
• Smaller, one-off acquisitions
• Sale of Personal Goodwill
• Sale of Option
• Risk of Recharacterization
• Payment for Non-Compete vs. Compensation
• Management vs. Investor Perspectives on
  Distributions
• PE investors must mark their portfolios and
  EBITDA will be critical

20
Corporate vs. Partnership Structures for Target
(Investee) Portfolio Companies held by PE Funds

• Management LTEIP Structures
• Grants of Partnership Interests
• Options Plans
• Profits Interests
• Bonus plans
• Management Challenges Relating to All of the
  Above
• Valuation, rebooking and phantom Income issues
• Earnings hits for EBITDA consider GAAP and tax
• Survivor mentality for who is actually there
  for a Liquidity Event

21
Corporate vs. Partnership Structures for Target
(Investee) Portfolio Companies held by PE Funds

• State and Local Tax (SALT) Issues in Partnerships
• Depending upon nature of investments, state tax
  filings could be triggered in multiple
  jurisdictions
• Multiple flow-through portfolio companies in
  multiple jurisdictions
• Even for de minimis amounts, penalties can be
  significant and lead you to file the analysis
  must be undertaken

22
Real Assets Oil Gas Working Interests

• Net Profits Interest Conveyance
• Fund for Domestic Taxable Investors acquires a
  Working Interest
• Such Fund conveys Net Profits Interest in the
  Working Interest to a parallel fund for TEIs to
  allow them to invest without generating UBTI
• NPI must relate to real estate
• TEI Fund lends taxable fund cash sufficient to
  finance tangible personal ppty

23
Real Assets Oil Gas Working Interests

• Accounting and Expense Allocation Issues
• Administrative Issues, including multiple closes
  and potential need for revaluation
• Use of NPI Calculation Agent
• Cannot add or pull out properties within an NPI
  conveyance after it is constituted
• PLP Structure to Accommodate Financing for TEI
  Fund
• Making Taxable and Tax-Exempt Funds Economically
  Equivalent

24
Real Assets Oil Gas Working Interests

• Acquisitions Financing Structure

Seller
Energy Fund GP, L.P.
Lender 2
Lender 1
PLP L.P.
Tax-Exempt Investors
PLP
Taxable Investors
Energy Fund II-A, L.P.
Energy Fund II-B, L.P.
25
Real Assets Timber

• TIMOs Timber Investment Management Organization
• Actual silvicultural management, timber cruises,
  etc. handled by the TIMO
• Some infrastructure and staffing to evaluate HBU
  plays

26
Real Assets Timber

• 631(a) vs. 631(b) cutting contracts
• Wood supply agreements are one of two types,
  delivered log contracts under Section 631(a) of
  the Codethe owner harvests the timber and sells
  the cut logsand pay-as cut or lump sum contracts
  under Section 631(b) of the Codethe purchaser
  harvests the timber and pays for what has been
  cut and the owner has a retained economic
  interest in the timber, or the owner sells
  standing timber outright for a lump sum.

27
Real Assets Timber

• 631(b) cutting contracts pay as cut or lump
  sum contracts produce income which is passive
  income under Section 512(b) and not UBTI in the
  hands of tax-exempt investors

28
Real Assets Timber

• HBU Sales care to avoid treatment as a dealer
  to avoid generating UBTI and preserve LTCGs
• Partnership agreement provisions confirming
  investment purpose
• Use of SPVs for various holdings, tracking time
  and efforts for HBU sale to show minimal nature

29
Real Assets TimberHBU Sales

• Various factors considered, with frequency and
  substantiality of sales being most important
• Nature and purpose of acquisition of ppty and
  duration of ownership
• Nature and extent of taxpayers efforts to sell
  ppty
• Number, extent, continuity and substantiality of
  the sales
• Extent of subdividing, developing and advertising
  to increase sales
• Use of business office for sales
• Time and effort habitually devoted to sales

30
Real Assets Other

• Financial distress in municipalities
• Focus on key infrastructure assets
• Good match for large state pension funds
• Airports
• Railways
• Toll Roads (mixed bag)
• Professional management
• Political challenges vs. economic reality

31
ERISA Considerations

• VCOC- by taking an active role in the management
  of portfolio companies, PE funds may rely on an
  exemption from ERISA for venture capital
  operating companies
• At least 50 of assets must be invested in
  venture capital investments
• Must exercise management rights with respect to
  one or more of the operating companies in which
  it invests

32
ERISA Considerations

• REOC
• Real estate funds seek to rely on an exclusion
  from ERISA for real estate operating companies
• Must invest at least 50 of assets in real estate
  that is managed or developed and for which the
  fund has the right to substantially participate
  in the management or development activities
• Delegation is possible, so long as the fund has
  the right to terminate at will and actually
  supervises

33
ERISA Considerations

• Section 408(b)(2) Regulation 2550.408b-2(c)
  requiring covered Service Providers to make
  specified periodic disclosures to covered plans,
  mainly around compensation arrangements

34
ERISA Considerations

• Significant Participation Test
• A private fund is generally able to avoid ERISAs
  application if it limits the level of investment
  by benefit plan investors to less than 25 of any
  class of the funds equity

35
ERISA Considerations

• Significant Participation Test
• Count all Benefit Plan Investors
• Employee Benefit Plans subject to ERISA
• Taft-Hartley (multi-employer) Plans
• Certain church plans
• IRAs this is an easy one to miss!
• Importantly, government plans (e.g., CALPERs,
  Colorado PERA) dont count

36
ERISA Considerations

• Significant Participation Test
• Disregard Investments by manager and affiliates
  (they are not counted in the denominator to
  calculate the 25)
• Test on a Class Basis
• Continuous monitoring required

37
ERISA Considerations

• Assuming the private fund meets the significant
  participation test, relief can be found from the
  prohibited transactions relating to parties in
  interest through status as a QPAM or Qualified
  Professional Asset Manager.

38
ERISA Considerations

• QPAM Status
• Registered Investment Adviser AND
• Must have in excess of 85 mm in client AUM as of
  the last day of most recent FY AND
• Must have partner/shareholder equity in excess of
  1 mm as of the most recent balance sheet
  prepared in accordance with GAAP

39
ERISA Considerations

• Other Consequences of holding plan assets
• Performance Fees
• Use of Affiliated Brokers
• Cross Trades
• Principal Transactions
• Custody
• Employer Securities
• Expenses

40
ERISA Considerations

• Other consequences of holding plan assets
  continued
• Expenses
• Indemnification
• Potential Plan Sponsor Liability
• Co-Fiduciary Liability
• Fidelity Bonding
• Information Reporting

41
ERISA Considerations

• Performance Fees permissible if
• Fund manager is an RIA
• Decision to hire Fund manager (i.e., to invest in
  the Fund) and to pay performance fee made by
  independent fiduciary of each benefit plan
  investor
• Each benefit plan investor has total assets of at
  least 50 mm
• Investor can withdraw from the Fund on reasonably
  short notice

42
ERISA Considerations

• Performance Fees Continued
• Arrangement complies with Advisers Act Rule 205-3
• Total fees paid do not exceed reasonable comp
• Fund manager or affiliates do NOT act as market
  maker for securities transactions by Fund

43
ERISA Considerations

• Performance Fees Continued
• Perf Fee determined on annual performance, taking
  into account both realized and unrealized gains
  and losses, and where termination date is other
  than an anniversary date, net profit is
  determined from the beginning of the prior full
  year through termination date

44
ERISA Considerations

• Performance Fees Continued
• FINALLY, each benefit plan investors fiduciary
  represents that it fully understands the formula
  for calculating the perf fee and the risks
  associated with such arrangements
• These criteria ONLY APPLY if the manager is an
  investment manager under ERISA, which it would
  not be if the significant participation test is
  satisfied.

45
Other Investment Fund Considerations for
Partnerships PTP Rules under 7704

• Under IRC Section 7704, a partnership with more
  than 100 investors will be treated as a publicly
  traded partnership and taxed as a corporation if
  interests in the partnership are traded on an
  established securities market or a secondary
  market or the substantial equivalent of such a
  market.

46
Other Investment Fund Considerations for
Partnerships PTP Rules under 7704

• Options?
• Limit income to qualifying income
• Can be difficult to achieve 90 or more gross
  income as investment-type income
• Commodities dont generally qualify
• Mezzanine financings dont generally qualify
• Limit withdrawals to redemption and repurchase
  safe harbor
• Limit the number of investors to 100, per the
  private placement safe harbor

47
Other Investment Fund Considerations for
Partnerships PTP Rules under 7704

• Resulting Practice Strict Adherence to Private
  Placement Safe Harbor for Institutionally-Oriented
  Funds to support a will tax opinion
• Use of Multiple Funds with 100 partners
• Modifying Investment Strategies (particularly
  targeted volatility levels) among funds to
  distinguish them

48
Other Investment Fund Considerations for
Partnerships PTP Rules under 7704

• For PE funds, strict policing of transfers and
  secondary transactions is needed to establish
  that the substantial equivalent of a secondary
  market does not exist, where the PE fund has more
  than 100 partners
• Contrast with secondary managers with significant
  funds to deploy

49
Other Investment Fund Considerations for
Partnerships PTP Rules under 7704

• Growing use of Commodities
• 90 Qualifying Income under 7704(d) relevant if
  a partnership exceeds 100 partners and permits
  withdrawals more frequently than quarterly,
  outside of the redemption and repurchase safe
  harbor
• Commodities-related income and gain is only
  Qualifying Income if a principal activity of
  the partnership is buying and selling commodities
  or options, futures or forwards with respect to
  commodities

50
Other Investment Fund Considerations for
Partnerships PTP Rules under 7704

• Scant Guidance as to what a principal activity
  means
• Examples from Percentage Holdings
• Dedicated Investment Team Members (those holding
  a Series 3 license)
• Number of Trades
• of absolute value of gains and losses generated

51
Other Investment FundConsiderations for RICs

• Regulated Investment Companies registered under
  the 1940 Act and electing to be taxed as RICs
  under Subchapter M.
• 90 of its gross income must be Qualifying
  Income under IRC Section 851(b)(2).
• Asset diversification test
• Year-end distribution obligation to distribute
  90 of its realized taxable income for the
  taxable year

52
Other Investment FundConsiderations for RICs

• Qualifying Income 90 of a RICs gross income
  must be derived annually from the qualifying
  income sources enumerated in IRC Section
  851(b)(2).
• Notably absent from the list are income and gains
  on commodities
• Commodities are not securities under 2(a)(36)
  of the 1940 Act

53
Other Investment Fund Considerations for RICs

• Growing Use of Commodities for Liquid Alternative
  Strategies
• Use of offshore subsidiary blockers
• CFC, Subpart F Income will be includable in gross
  income of the RIC
• So long as currently distributed, it will be
  Qualifying Income
• Limited to 25 of total asset value as of the end
  of each quarter of each tax year (includes assets
  held as collateral for derivative positions).

54
Other Investment FundConsiderations for RICs

• Use of Commodity-Linked Notes (CLNs)
• RIC pays issuer par value upon purchase, and
  receives par value back from issuer at maturity,
  adjusted up or down by the product of (1) par
  value, (2) change in value of a commodity index,
  and (3) a leverage factor not to exceed three.
• Additional debt-like features
• Interest payments
• Early redemption feature for principal protection
• No more than three year maturity
• Status as a security somewhat unclear, but it
  is the basis of status as qualifying income

55
Recently Proposed Rules for RICs holding MLPs

• In recent years, MLPs have grown in popularity as
  an investment because of their yield.

56
Recently Proposed Rules for RICs holding MLPs

• Closed-end Funds and Open-End Funds have been
  launched to invest a significant portion of their
  portfolios in MLPs. Many of these funds are
  structured as RICs some are structured as C
  corporations.

57
Recently Proposed Rules for RICs holding MLPs

• For those that are RICs, under Section
  851(b)(3)(B), to qualify as a RIC, a fund must
  have not more than 25 of its total assets in
  qualified publicly traded partnerships (as
  defined in Section 851(h)). This is part of the
  asset diversification test.

58
Recently Proposed Rules for RICs holding MLPs

• Some industry participants structured as RICs
  used a subsidiary C corporation to increase
  exposure to MLPs above the 25.

59
Recently Proposed Rules for RICs holding MLPs

• On August 2, 2013, the Service proposed
  regulations under Section 851(c) regarding the
  definition of a controlled group for purposes
  of the asset diversification test, to provide a
  look through for the investments of subsidiary
  C corporations.

60
Recently Proposed Rules for RICs holding MLPs

• Public hearing scheduled for December 9, 2013.

61
Side Letter Practice Among Institutional
Investors

• Requirement for Legal Opinions
• Delaware law corporate opinion covering due
  authorization and enforceability of the side
  letter
• Rubber hits the road on fiduciary issues
• Tax opinion as to partnership status
• Rubber hits the road on 7704 PTP safe harbors
• FIN 48 interplay on tax positions taken at fund
  level

62
Side Letter Practice AmongInstitutional Investors

• Transparency into fund portfolio
• More sophisticated risk management protocols
  require real time information
• Issues with other investors
• Provide all investors with same information
• Use of aggregation services

63
Side Letter Practice Among Institutional
Investors

• Accelerated or Enhanced Liquidity/Withdrawal
  Rights
• Issues for other investors the GPs fiduciary
  responsibilities
• If registered under the Advisers Act, the GP has
  additional fiduciary obligations

64
Side Letter Practice Among Institutional
Investors

• Most Favored Nation clauses (MFNs)
• Regulatory risk implement a compliance policy
  and appoint someone responsible for overseeing
  MFN compliance
• Carve-outs
• Founders, manager and affiliates and employees
• By dollar amount invested
• By regulatory conditions
• Provide summary with identifying information
  omitted, to protect privacy
• Take the bitter with the sweet no
  cherry-picking!

65
Side Letter Practice AmongInstitutional Investors

• Other Provisions
• Non-US Withholding Taxes and Tax Filings
• Listed Transactions and Prohibited Reportable
  Transactions
• Notice Provisions (disparate informational
  concerns)
• Key Person Provisions (disparate informational
  concerns)
• Indemnification Limitations (esp. govt and ERISA
  plans)
• Jurisdictional issues (esp. govt plans)
• Confidentiality/Public Records Issues

66
1940 Act Considerations

• 3(c)(1) Funds Not more than 100 beneficial
  owners and not making or presently proposing to
  make a public offering (all accredited investors
  under Reg D is the norm)
• Non-integration for taxable and tax-exempt
  parallel funds
• Look-through for owners of 10 or more of a
  3(c)(1) funds voting securities
• Look-through for entities formed for the purpose
  of investing in a 3(c)(1) fund, 40 test
• General solicitation under new Rule 506(d) passed
  under the JOBS Act permissible

67
1940 Act Considerations

• 3(c)(7) Funds up to 1999 record holders under
  1934 Act
• All investors must be qualified purchasers
• QP status for individuals means 5 mm in
  investments
• For entities, 25 mm in investments
• Same private placement requirement as 3(c)(1)
  funds
• All accredited investor offerings are the norm

68
1933 Act Considerations

• Per the above, all 1940 Act exemptions require an
  exemption from the registration requirements of
  the 1933 Act
• Rule 506 of Regulation D
• Federal Covered Security status under NSMIA
• Blue Sky notice filings and fees
• More aggressive state regulators

69
Investment Advisers Act of 1940 Considerations

• Registration of the Manager
• 100 mm AUM threshold for SEC registration
  generally
• 150 mm AUM threshold for private fund advisers
  (exempt reporting adviser status)
• State regulation
• Performance Fees can only be charged to
  Qualified Clients

70
Investment Advisers Act of 1940Considerations

• Exemption for Advisers to Venture Capital Funds
• 80 qualifying investments in equity securities
  issued by qualifying portfolio company
• Must be an operating company
• Does not incur leverage for funds investment
• Not a reporting or foreign traded company
• Limitation on fund-level leverage 15
• Any such leverage is for a non-renewable term not
  longer than 120 days
• No redemptions by investors
• Venture capital strategy representation
• Private fund status (not registered as an
  investment company or BDC)

71
Investment Advisers Act of 1940 Considerations

• With regulatory burdens come opportunities
• Attracting institutional money

72
Commodity Exchange Act

• Recent changes post-Dodd Frank eliminated Rule
  4.13(a)(4), which was an exemption from CPO
  registration for pools offered to highly
  sophisticated investors
• Rule 4.13(a)(3) exemption still available, but
  more limited, available to managers of private
  funds
• Aggregate initial margin does not exceed 5
• Aggregate net notional exposure does not exceed
  100

73
Commodity Exchange Act

• 4.13(a)(3) sales only to Qualified Eligible
  Persons (QPs automatically qualify)
• Many managers implementing quantitative
  strategies must register as CPOs and CTAs

74
Broker/Dealer Registration Requirements under the
1934 Act for PE Fund Managers

• 1934 Act Section 15(a)(1) prohibits any person
  from effecting transactions in, or inducing or
  attempting to induce the purchase or sale of, any
  security, unless that person is registered as a
  broker
• Section 3(a)(4)(2) defines a broker as any person
  engaged in the business of effecting transactions
  in securities for the account of others

75
Broker/Dealer Registration Requirements under the
1934 Act for PE Fund Managers

• Key Factors
• Participant in key parts of transaction
• Prior experience in securities transactions
• Disciplinary issues
• Handling of funds or securities
• TRANSACTION-BASED COMPENSATION

76
Broker/Dealer Registration Requirements under the
1934 Act for PE Fund Managers

• David W. Blass, Chief Counsel, Division of
  Trading and Markets,?SEC, Speech on April 5, 2013
  to the ABA Trading and Markets Subcommittee A
  Few Observations on the Private Funds Space.

77
Broker/Dealer Registration Requirements under the
1934 Act for PE Fund Managers

• Very limited applicability of the issuer
  exemption in 1934 Act Rule 3a4-1.
• Generally applicable to an operating company
  personnel of which only occasionally engage in
  securities sales (no more than once every 12
  months)
• Personnel must regularly perform substantial
  duties not related to sales of securities
• No transaction-based compensation

78
Broker/Dealer Registration Requirements under the
1934 Act for PE Fund Managers

• Transaction-based compensation is important,
  butif issuer personnel are regularly engaged in
  broker/dealer activity, broker/dealer
  registration may be triggered
• Continuous capital raising activities
• Internal marketing personnel had better be
  registered reps of a broker/dealer
• Private Placements where is the broker/dealer?

79
Broker/Dealer Registration Requirements under the
1934 Act for PE Fund Managers

• Compliance Point How certain fees are booked
• commissions and sales charges appearing on
  the G/L need to be paid to a broker/dealer
• SEC specifically asks for accounting records in
  its examinations
• Internal protocols to vet and document the status
  of payees as broker/dealers should be implemented
• Payment to an unregistered broker/dealer blows
  the Blue Sky exemption, opens the issuer to
  rescission liability

80
Broker/Dealer Registration Requirements under the
1934 Act for PE Fund Managers

• Other PE fund and manager activities
• Investment banking or brokerage activities for PE
  fund portfolio companies
• Fees charged for sales or financings executed for
  portfolio companies

81
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82
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83
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84
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• The attorneys at Chamberlain Hrdlicka understand
  the nature of representing wealthy individuals
  and their families.  Our Family Office attorneys
  are very knowledgeable in not only establishing,
  but sustaining a Family Office for future
  generations.  We can offer our clients an array
  of services which include, but are not limited
  to, investment management regulation and
  compliance, income, estate and gift tax planning,
  business succession planning, as well as legal
  aspects of management of closely-held businesses
  through a Family Office.

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Chamberlain HrdlickaFinancial Services Practice
Areas

• Financial Services
• Chamberlain Hrdlickas financial services team is
  equipped to handle the ever-changing landscape of
  the financial sector and help our clients reach
  their business objectives.  Our sophisticated
  financial services practice includes work in many
  areas of the industry, including mergers and
  acquisitions, asset management, capital market
  activities, product development and compliance,
  federal and state securities and domestic and
  offshore company formation.  Chamberlain Hrdlicka
  routinely counsels their clients on matters
  regarding regulatory initiatives and legislation,
  as well as privacy law compliance.

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Chamberlain HrdlickaFinancial Services Practice
Areas

• Hedge Funds
• Chamberlain Hrdlicka understands sophisticated
  private managers need legal advisers with a level
  of knowledge and understanding of complex
  investment strategies that can support such
  sophistication. Our hedge fund attorneys have
  experience working with managers with many
  different fund styles, from single-strategy to
  multi-strategy hedge funds and funds of hedge
  funds. Chamberlain Hrdlicka assists clients
  throughout all stages of hedge fund development,
  providing counsel on the establishment and
  operation of hedge funds, including the
  preparation of fund formation documents and
  private placement memoranda. Chamberlain
  Hrdlickas hedge fund practice is dedicated to
  providing our clients with a partner to help
  assess and manage legal risk so they can focus on
  maximizing return. 

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Chamberlain HrdlickaFinancial Services Practice
Areas

• Investment Advisors
• Chamberlain Hrdlicka attorneys advise clients in
  all aspects of their investment advisory
  business, including both retail and institutional
  advisory businesses.  We counsel our investment
  adviser clients on the formation and operation of
  many types of alternative investment vehicles,
  including hedge funds, fund-of-funds, venture
  capital and private equity funds, private real
  assets funds and other public and private pooled
  investment vehicles.  We also advise our clients
  on the complex federal and state regulatory,
  legal and compliance issues affecting investment
  advisers and their affiliates, including
  pay-to-play rules and lobbyist registration
  compliance matters.

88
Chamberlain HrdlickaFinancial Services Practice
Areas

• Investment Management
• Chamberlain Hrdlickas investment management team
  provides a full range of legal, regulatory and
  advisory services including business formation,
  governance issues, transactions, registration,
  documentation and agreements, operational
  matters, and other corporate matters.   We are
  able to advise our clients through each stage of
  investment maturation, assisting clients from
  fund formation and management to distribution
  arrangements with financial intermediaries.  Our
  clients include mutual funds, closed-end funds,
  domestic and offshore private investment funds
  (including venture capital, private equity, and
  hedge funds), investment advisers, and
  broker-dealers.

89
Chamberlain HrdlickaFinancial Services Practice
Areas

• Private Equity Funds
• Chamberlain Hrdlickas private equity attorneys
  can advise clients throughout the life cycle of a
  private equity transaction, from formation, to
  investments and ultimately to exit. We have
  expertise and experience in sophisticated
  transactions including leveraged buyouts,
  management buyouts, spin-offs, venture capital
  financings, going-private transactions, and
  recapitalizations and dispositions, as well as
  cross-border and international transactions.

90
Chamberlain HrdlickaFinancial Services Practice
Areas

• Private Funds
• Chamberlain Hrdlickas Corporate, Securities
  Finance practice group includes a team of
  attorneys who are well-versed in all legal and
  regulatory matters relevant to managing and
  investing in private funds. Our experience across
  many private fund structures, including private
  investment funds, hedge funds and private equity
  funds, enables us to assist clients in a wide
  scope of fund investment activities.
• We help our clients move forward with private
  fund activities, employing a cross-disciplinary
  approach that incorporates the firms greater
  Corporate, Securities Finance practice, along
  with other relevant practice areas including tax
  and tax planning. At any juncture in private fund
  operations, from fund formation to ongoing fund
  management, our team can navigate the legal,
  regulatory and compliance and governance matters,
  advancing for our clients the diverse objectives
  of both fund sponsors and investors.

91
Chamberlain HrdlickaFinancial Services Practice
Areas

• Wealth Management
• Chamberlain Hrdlickas attorneys routinely
  counsel our financial services industry clients
  on their wealth management businesses. We
  understand wealth management represents the
  intersection of many disciplines, from investment
  advisory, broker/dealer, family office and tax
  and estate planning, to international tax and
  cross-border planning.  Our strength in the tax
  and international tax areas also provides
  additional support to our clients with wealth
  management businesses.

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Jonathan W. DePriest

• Jonathan DePriest maintains a sophisticated merger
  s and acquisitions practice, with an emphasis on
  investment management and financial
  services industries and asset management and
  wealth management firms, as well as private
  pooled investment vehicles (such as hedge funds
  and private equity funds).  Mr. DePriest has
  successfully concluded over 2 billion in merger
  and acquisition transactions, drawing also upon
  the Firms strength in the tax field to provide
  sophisticated analysis and support in structuring
  transactions. 
• Mr. DePriest also counsels asset management
  clients in launching and managing private pooled
  investment vehicles, and serves as counsel to the
  adviser for regulated investment companies.  Mr.
  DePriest has assisted in launching private
  investment funds that currently manage over 7
  billion in assets.  These funds have comprised
  diversified multi-asset class, multi-strategy
  funds of funds as well as single-strategy hedge
  funds, liquid alternatives funds, registered and
  regulated investment companies, and alternative
  investments such as timber, private energy and
  private equity.

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Chamberlain Hrdlicka WhiteWilliams Aughtry

• Atlanta
• Denver
• Houston
• Philadelphia
• San Antonio
• jonathan.depriest_at_chamberlainlaw.com