Asia funds to feel Reg D lift

Private equity funds in Asia will be impacted by US regulations that allow firms to publicly advertise investment products, but some local regulations still impose limits on solicitation.

New amendments implemented by the US Securities and Exchange Commission have significance for private equity funds in Asia, but the outcome will vary by country depending on local regulations, according to Kai Schneider, head of funds at Clifford Chance in Singapore. 

He told Private Equity International, “I think it will have an impact on fund managers in Asia – it will definitely change the way they approach their marketing and fundraising activities. Previously, unless a fund expressly avoided all US investors, the position was very strict in terms of what was allowed when speaking to the press or at conferences and in general with advertising.” 

I think it will have an impact on fund managers in Asia – it will definitely change the way they approach their marketing and fundraising activities.

Kai Schneider, head of funds at Clifford Chance in Singapore

As expected, the SEC in the US voted this month to end a decades-old ban on “general solicitation”, which in the past prevented general partners from freely discussing fundraising efforts and performance numbers in a public setting.

Fund managers that want to mass advertise must now file a Form D with the SEC 15 days before fundraising, and an amended Form D within 30 days after fundraising concludes (or is abandoned). 

Schneider added that it could become more acceptable for firms to use media advertising to publicise their funds, or at least be more frank with the industry about their current activities.

“It will allow more public conversations to occur regarding products that are in the market – it will make conferences more up-to-date, more transparent and will remove a compliance burden on GPs in the region.”

However, Asian private equity funds still have to comply with locally-administered regulation. “As there are existing restrictions on advertising in Asian jurisdictions, I think fund managers will be limited in terms of what they can do because of these regional restrictions.”

There are also questions over whether Asia-based regulators are likely to follow the SEC’s decision to allow the marketing of public funds. 

In China, for example, private equity has been in the spotlight after many domestic fund managers raised capital using a retail-like method targeting non-institutional unsophisticated investors, sparking debate over how private funds can market to investors.

One industry source said, however, that China is unlikely to adopt the US approach toward fund solicitation.

“It will colour the discussion. Obviously, regulators always look to others to see what they’re doing in order to make decisions about their own regulations. I do think, however, that regulators tend to be very independent and I would suspect that the Chinese in particular would not want to be viewed as following the US.”