Businesses of all types and sizes throughout the United States, Mexico and beyond bring their disputes to Gardere's litigation team and receive practical, responsive, boutique-style attention in return. Our clients have access to the firepower and value of a well-known and highly-regarded Firm's capabilities and interdisciplinary strengths.
Gardere has a national and international energy practice formed around our Energy Industry Team, which is a multidisciplinary group of approximately 60 attorneys with diverse backgrounds, experience and skills specific to the energy industry. Our team includes attorneys who have served as in-house counsel for major energy companies, providing a depth of insight into our clients' needs, issues and concerns. We understand and regularly practice in virtually every sector of the energy, and we represent a wide variety of industry participants from multinational corporations to individuals.
From our offices in the United States and Mexico, our International Practice helps clients operate in today’s global economy. We have more than 30 professionals operating as a boutique within an Am Law 200 law firm and are able to provide focused service with the resources of a large firm. We understand that clients who are engaged in the global marketplace need lawyers who can operate seamlessly across multiple jurisdictions. Our international experts are multi-lingual, are culturally fluent and intimately familiar with various legal systems across the world, especially those in Latin America. Whether you need help with commercial transactions, regulatory matters, customs and import regulations, immigration matters, M&A and joint ventures, international disputes, or international tax planning, Gardere’s international team is here to assist you.
We represent domestic and foreign private funds in all aspects of fund formation, fund operations, platform and add-on acquisitions, and portfolio company operations. Our team has a reputation for being the go-to-lawyers for private equity funds, hedge funds, venture capital funds and family offices. We are known for our vast deal experience, the efficient way we staff and manage our work, and the way we maintain our relationships. We get deals done with sophisticated, strategic, and practical advice tailored to the needs of our clients.
*Not admitted to practice law.
The SEC’s Division of Investment Management recently released an IM Guidance Update to address two issues under the SEC’s “Custody Rule,” Rule 206(4)-2, under the Investment Advisers Act of 1940, as amended. Those issues concern investment advisers registered with the SEC (“Advisers”) that are sponsors or managers of private equity funds, hedge funds, and other private pooled-investment funds or vehicles (“Funds”).
Application of Audit Exemption to SPVs
The Custody Rule applies to an Adviser that serves, or has a related person that serves, as a Fund’s general partner, manager, or managing member, because the Adviser is deemed to have custody of the assets of the Fund. Such an Adviser, however, will typically rely on a provision of the Custody Rule that exempts from compliance with most of the Custody Rule’s requirements if the Fund:
An Adviser to a Fund may, for legal, tax, or other regulatory purposes, use a special-purpose vehicle (controlled by the Adviser or a related person) to make and hold one or more securities investments by the Fund (“SPV”). The Division has received inquiries regarding how an Adviser can rely on the audit exemption when an SPV is involved: Assuming the SPV is considered a client of the Adviser, must the Adviser treat the SPV as a separate client over whose assets the Adviser has custody, or may the Adviser treat the SPV’s assets as those of the Fund or Funds over whose assets the Adviser has custody?
In the Guidance, the Division indicated that for the audit exemption:
Post-closing Escrow Accounts with Sale Proceeds
The Division also addressed an Adviser’s compliance with the Custody Rule in connection with the sale of a portfolio company by a Fund or Funds, especially a private equity fund. The Custody Rule requires an Adviser to maintain funds and securities over which it has custody with a qualified custodian either in a separate account for each client in the client’s name or in one or more accounts containing only clients’ funds and securities that are maintained in the adviser’s name as agent or trustee for the clients.
In a sale of a portfolio company, a temporary escrow account is typically created and maintained to hold a portion of the sale proceeds to be available to satisfy post-closing purchase-price adjustments or indemnification claims under the acquisition agreement, and a “sellers’ representative” is typically appointed to act on behalf of the sellers. The sellers may include not only one or more Funds managed by the Adviser, but also other unaffiliated parties. Advisers have argued that, in such circumstances, the Adviser’s compliance with the separate-account requirements of the Custody Rule may be relatively expensive, without affording any significant additional protection, for the Fund’s investors.
In the Guidance, the Division indicated that it would not object if an Adviser maintains client funds in an escrow account with assets of other clients and non-clients if:
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