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Hedge Funds: Formation, Operation and Regulation

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This new guide addresses legal and practical issues of importance to counsel for both sponsors and investors, covering domestic/off-shore funds, terms, fees, regulatory requirements, and more.

Since the first funds were established over sixty years ago, the hedge fund industry has grown dramatically in size and complexity. More than just a passing phenomenon, hedge funds are now an important part of global asset management -- and increasingly the focus of new legislation and regulation.

This up-to-date and forward-looking new guide explains:

  • Hedge fund investment strategies
  • Domestic and off-shore hedge fund structure and tax considerations
  • Terms, fees, and related considerations for sponsors and investors
  • Regulatory requirements and fiduciary obligations of investment advisers
  • Fund documentation, including marketing materials, offering memoranda, governing documents and related and agreements
  • Structuring a hedge fund management company
  • Pros and cons of using service providers
  • Seed investors
  • United Kingdom hedge fund Requirements
  • Financing arrangements for hedge funds
  • Registered hedge funds

Featuring contributions from experts in each of these areas, Hedge Fundsaddresses legal and practical issues of importance to counsel for both sponsors and investors. Whether your concern is taxation, regulation, documentation, or overall strategy, it is an essential addition to your library.

Additional Information
Division Name Law Journal Press
Volumes 0
Product Types Books
Brand Law Journal Press
Publication Date September 30, 2013
Jurisdiction National
ISBN 978-1-58852-337-2
Page Count 0
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Paul N. Roth

Mr. Roth is a founding partner of Schulte Roth & Zabel and Chair of the Investment Management Group. Paul’s extensive private investment funds practice, an area in which he has more than 45 years of experience, includes the representation of hedge funds, private equity funds, offshore funds, investment advisers and broker-dealers in connection with fund formations and compliance, securities regulation, mergers and acquisitions (domestic and cross-border) and other financial transactions. Considered the “dean of the hedge fund bar,” Paul serves as a special adviser to the Board of Directors of the Managed Funds Association and as an adviser to the Alternative Investment Management Association and is a former member of the Legal Advisory Board to the National Association of Securities Dealers. He chairs the Subcommittee on Hedge Funds of the American Bar Association’s Committee on Federal Securities Regulation and is a former chair of the New York City Bar Association’s Committee on Securities Regulation. Paul was named New York City Private Funds/Hedge Funds Law Lawyer of the Year by The Best Lawyers in America and received a Lifetime Achievement Award from Hedge Funds Care in recognition of his prominence in the hedge funds industry and his extraordinary commitment to philanthropy. Paul was named to HFMWeek’s 2010 list of the 50 most influential people in hedge funds. He is a member of the Boards of Directors of the NAACP Legal Defense and Educational Fund, Citizens Committee for New York City, the Advisory Board of the RAND Center for Corporate Ethics and Governance, and a fellow of the New York Bar Foundation and the Phi Beta Kappa Society. 

David J. Efron

Mr. Efron is a partner in the Investment Management Group at Schulte Roth & Zabel in New York, where he practices in the areas of domestic and offshore hedge funds, including fund formations and restructurings. Additionally, he advises hedge fund managers on structure, compensation and various other matters relating to their management companies, and structures seed capital and joint venture arrangements. David also represents hedge fund managers in connection with SEC regulatory issues and compliance-related matters. A published author on subjects relating to investment management, he is often a speaker for hedge fund industry conferences and seminars and is a frequent guest lecturer at New York-area law schools and business schools

David Nissenbaum

Mr. Nissenbaum is a partner in the Investment Management Group at Schulte Roth & Zabel in New York. His practice focuses on corporate, bank regulation and securities matters. He primarily represents institutional and entrepreneurial investment managers, financial services firms and private investment funds in all aspects of their business. David structures and advises investment management and financial services firms as well as hedge, private equity and hybrid funds, funds of funds and scalable platforms for fund sponsors. He also advises on succession planning, mergers and acquisitions of investment firms and on all aspects of U.S. banking laws that affect investment and financial services firms and investment funds, including investments in banking organizations and bank-sponsored funds and investments in funds by banking organizations. A member of the Advisory Board of The Financial Executives Alliance and former member of the Banking Law Committee of the New York City Bar Association, David is a sought-after writer and speaker in his areas of expertise. David has been recognized by The International Who’s Who of Private Funds Lawyers, PLC Cross-border Private Equity Handbook, The Legal 500 United States, IFLR Guide to the World’s Leading Investment Funds Lawyers, Chambers USA and Chambers Global.

Marc E. Elovitz
Mr. Elovitz is a partner and chair of the Investment Management Regulatory & Compliance Group at Schulte Roth & Zabel in New York. He advises hedge funds, private equity funds and funds of funds on compliance with the Investment Advisers Act of 1940 and other federal, state and self-regulatory organization requirements, including establishing compliance programs, registering with the SEC and handling SEC examinations. Marc provides guidance to clients on securities trading matters and represents them in regulatory investigations and enforcement actions, arbitrations and civil litigation. He also regularly leads training sessions for portfolio managers and analysts on complying with insider trading and market manipulation laws. A member of the American Bar Association’s Business and Litigation Sections, the New York City Bar Association and the Hedge Funds Subcommittee of the Committee on Federal Securities Regulation, Marc is repeatedly asked to speak at hedge fund industry conferences and seminars.
Stephanie R. Breslow
Ms. Breslow is a partner, co-head of the Investment Management Group and a member of the Executive Committee at Schulte Roth & Zabel in New York. Her practice focuses on the formation of liquid-securities funds, private equity funds and providing regulatory advice to investment managers and broker-dealers. She also represents fund sponsors and institutional investors in connection with seed-capital investments in fund managers and acquisitions of interests in investment-management businesses, and represents funds of funds and other institutional investors in connection with their investment activities. Recently named Vice-Chair of the Private Investment Funds Subcommittee of the International Bar Association, Stephanie is a founding member and former chair of the Private Investment Fund Forum, a member of the Advisory Board of Third Way Capital Markets Initiative, a former member of the Steering Committee of the Wall Street Fund Forum and a member of the Board of Trustees of 100 Women in Hedge Funds. Stephanie was named one of The Hedge Fund Journal’s 50 Leading Women in Hedge Funds. She is a much sought-after speaker on private equity and hedge fund formation and operation, and regularly publishes articles on the latest trends in these areas.
Steven J. Fredman
Mr. Fredman is a partner and co-head of the Investment Management Group at Schulte Roth & Zabel in New York. He concentrates his practice in the areas of investment funds (domestic and offshore), investment advisers and broker-dealers, the acquisition and related financing of investment management firms, and securities regulation. Steve has structured and organized private investment partnerships and offshore funds, including general equity, arbitrage, global investment, private equity, distressed company, small cap and fund of funds, and has counseled on issues relating to partnership law, new product development and other matters. He has structured and organized investment advisers and broker-dealers, handled the registration of commodity pool operators and commodity trading advisors, and provided ongoing advice to investment advisers on securities laws, rules, regulations and information. He has also represented clients in connection with the acquisition and sale of investment management firms or their assets.
History of Hedge Funds
§ 1.01    In General
§ 1.02    Early Regulatory Considerations
§ 1.03    Regulatory Focus On Hedge Funds
§ 1.04    Conclusion

Hedge Fund Strategies
§ 2.01    Overview
§ 2.02    Long/Short Equity
§ 2.03    Credit Opportunities
[1]    Distressed
[2]    Fixed-Income
[3]    Structured Products and Derivatives
[4]    Lending/Loan Funds
§ 2.04    Event-Driven/Special Situations
§ 2.05    Arbitrage
[1]    Capital Structure Arbitrage
[2]    Convertible Arbitrage
[3]    Fixed-Income Arbitrage
[4]    Statistical Arbitrage
[5]    Volatility and Options Arbitrage
[6]    Merger/Risk Arbitrage
§ 2.06    Relative Value
§ 2.07    Managed Futures
§ 2.08    Global Macro
§ 2.09    Emerging Markets
§ 2.10    Quantitative (Black Box)
§ 2.11    Index
§ 2.12    Activist
§ 2.13    Multi-Strategy
§ 2.14    Funds of Funds

Hedge Fund Structures
§ 3.01    Overview
§ 3.02    Potential Investors
[1]    Taxable U.S. Investors
[2]    Tax-Exempt U.S. Investors
[3]    Non-U.S. Investors
[a]    Overview
[b]    Section 892 Investors
§ 3.03    Tax Implications of Certain Investments
[1]    Unrelated Business Taxable Income (UBTI)
[2]    U.S. Trade or Business
[3]    Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”)
[4]    U.S. Dividends
[5]    Long Term Capital Gains
§ 3.04    Domestic Hedge Funds
§ 3.05    Offshore Hedge Funds
[1]    Selecting Jurisdiction
[2]    Corporations
[3]    Limited Partnerships
[4]    Unit Trusts
[5]    Segregated Portfolio Companies
§ 3.06    Side-by-Side Structure
[1]    Overview
[2]    Benefits
[3]    Detriments
§ 3.07    Master-Feeder Structure
[1]    Overview
[2]    Benefits
[3]    Detriments
§ 3.08    Use of Intermediate Funds/Mini-Master Structure
[1]    Overview
[2]    Performance-Based Allocations
§ 3.09    Fund of Funds
§ 3.10    Use of Subsidiaries
§ 3.11    Control Issues
[1]    U.S. Funds
[a]    General Partner/Board of Managers
[b]    Advisory Boards
[c]    Removal Rights
[2]    Offshore Funds
[a]    Board of Directors
[b]    Management Shares
Fund Terms
§ 4.01    Overview
§ 4.02    Management Fees and Incentive Compensation
[1]    Overview of Management Fees
[2]    Management Fee Reserves
[3]    Other Fees and Offsets
[4]    Overview of Incentive Compensation
[5]    Highwater Marks
[a]    Calculating Highwater Marks
[i]    Loss Carryforward Accounts
[ii]    Series Roll-Up
[iii]    Share Equalization
[b]    Cumulative and Non-Cumulative Highwater Marks
[6]    Hurdle Rates
[7]    Clawbacks
[8]    Alternative Models
[9]    Intermediate and Mini-Master Fund Structures
[10]    Multi-Year Incentive Allocations
[11]    Payment of Fees During Wind-Down
§ 4.03    Expenses
[1]    Fund Expenses
[a]    Overview
[b]    Investment Expenses
[c]    Organizational Expenses
[d]    Ongoing Operational Expenses
[e]    Service Provider Costs
[f]    Extraordinary Expenses
[g]    Soft Dollars
[h]    Taxes
[2]    Investment Manager Expenses
[3]    Allocation of Expenses Across Funds
[4]    Allocation of Expenses Between Funds and In-vestment Manager
§ 4.04    Liquidity
[1]    Overview
[2]    Lock-Up Periods
[3]    Gates
[a]    Fund-Level Gates
[b]    Investor-Level Gates
[4]    Key Person Events
[5]    Suspensions
[6]    Side Pockets
[7]    Slow Pay Mechanisms
[8]    Reserves and Withholding
[9]    Payment-In-Kind
[10]    Liquidating Vehicles
[11]    Required Withdrawals
[12]    Considerations for Fund-of-Funds
[13]    Transfers
[14]    Legal and Tax Issues
[15]    Tax Distributions
[16]    Matching Liquidity Terms to Strategy
§ 4.05    Investors
[1]    Limited Liability
[2]    No Participation in Management
[3]    Voting and Consent Rights
[4]    Information Rights
[5]    Advisory Committees
§ 4.06    Investment Minimums, Additional Capital Contributions and Drawdowns
[1]    Overview
[2]    Cayman Islands and Other Considerations
[3]    Minimum Investment by General Partner
§ 4.07    Classes and Side Letters
[1]    Overview and Fiduciary Issues
[2]    Most Favored Nations Provisions
[3]    Liquidity Rights
[4]    Key Person Events
[5]    Fee Provisions
[6]    Information Rights
[7]    Representations and Warranties
[8]    Confidentiality
[9]    Investments by Sovereign Wealth Funds and State Government Plans
§ 4.08    Conflicts of Interest
[1]    Allocation of Investment Opportunities Across Funds
[2]    Allocation of Investment Opportunities Between Funds and Investment Manager
[3]    Dedication of Time
[4]    Fiduciary Considerations
§ 4.09    Exculpation and Indemnity Provisions
[1]    Exculpation
[a]    Standard of Care
[b]    Insurance
[c]    Delaware Law
[2]    Indemnity
[a]    Standard of Care
[b]    Offshore Fund Considerations
[3]    Limitation by Federal Securities Laws
[4]    Limitation by ERISA
[5]    Exculpation and Indemnification of the Invest-ment Manager Under the Investment Management Agreement
§ 4.10    Reporting and Information Rights
[1]    Periodic Reporting
[2]    Investor Due Diligence Requests
[3]    Portfolio Inspection Rights
§ 4.11    Valuation
[1]    Overview
[2]    Investment Manager's Discretion
[3]    Side Pocket Issues
[4]    Valuation by Third-Party Service Providers
[5]    ERISA Considerations
§ 4.12    Information Rights and Portfolio Transparency
§ 4.13    Leverage
§ 4.14    Hybrid Funds
[1]    Characteristics of "Hybrid Funds" and "Private Equity Lite" Funds
[2]    Investment Programs
[3]    Closings
[4]    Investment Periods
[5]    Management Fees and Incentive Compensation
[6]    Liquidity
[7]    Term
[8]    Co-Investment Rights
[9]    Investor Protections
§ 4.15    Amendments
[1]    Limited Partnerships
[a]    Unilateral Amendments
[b]    Limited Partner Consent Required
[2]    Offshore Companies
[a]    Unilateral Amendments
[b]    Shareholder Vote Required
[3]    Other Considerations
[a]    Negative Consent
[b]    Side Letter Requests
[c]    General Considerations
§ 4.16    Term of the Fund
[1]    Termination by the Investment Manager
[2]    Investor Termination Rights
[3]    Liquidation and Winding Up of the Fund
[a]    Delaware Limited Partnerships
[b]    Cayman Islands Companies
§ 4.17    Powers of Attorney
§ 4.18    Governing Law
§ 4.19    Submission to Jurisdiction
§ 4.20    Arbitration
Chapter 5
Regulatory Considerations
§ 5.01    Overview and Fiduciary Obligations
[1]    Overview
[2]    Investment Advisers as Fiduciaries
[3]    Breach of Fiduciary Duty Under the Advisers Act
[4]    Investment Advisers’ Fiduciary Duties
[a]    Duty of Disclose Conflicts of Interest
[b]    Duty to Seek Best Execution
[c]    Duties With Respect to the Substance of Investment Advice
[d]    Duty to Allocate Investment Opportunities Fairly Among Clients
[e]    Duty Regarding Reasonableness of Fees
[5]    Common Law Fiduciary Duties
[6]    Investment Company Act of 1940
[7]    Employee Retirement Income Security Act of 1974
§ 5.02    Investment Adviser Registration
[1]    SEC Registration Thresholds
[2]    Exemptions
[a]    Private Fund Adviser Exemption
[i]    Exemption for Investment Advisers with Less than $150 Million Regulatory AUM in the United States
[ii]    Determination of Regulatory AUM in the United States
[iii]    Frequency of Calculation of Pri-vate Fund Assets
[b]    Exemption for Advisers to Venture Capital Funds
[c]    Foreign Private Adviser Exemption
[i]    Counting Clients
[ii]    Counting Investors
[iii]    Meaning of “in the United States”
[iv]    Meaning of “Place of Business”
[3]    The SEC Registration Process
[a]    Pre-Registration Preparation
[b]    Form ADV, Parts 1 and 2
[c]    Registration of Investment Advisory Affiliates
[4]    State Registration and Notice Filings
[5]    Family Offices
§ 5.03    SEC Regulation of Investment Advisers
[1]    General Requirements
[a]    Designation of Chief Compliance Officer
[b]    Annual Review
[c]    Written Compliance Policies and Procedures
[d]    Code of Ethics
[i]    Rule 204A-1
[ii]    Personal Trading
[e]    Custody or Possession of Client Funds or Securities
[f]    Proxy Voting Procedures
[g]    Recordkeeping
[h]    Soft Dollars and Best Execution
[i]    Business Continuity Plan
[2]    Restrictions and Prohibitions
[a]    Principal and Cross Trades
[b]    Agency Cross Transactions
[c]    Cash Payment for Client Solicitations
[d]    SEC Rule 206(4)-5 (“Pay to Play”)
[e]    State and Local Pay to Play and Lobbyist Registration Requirements
[f]    Performance Fees
[g]    The “Hedge Fund Anti-Fraud Rule”
[h]    Assignment of Investment Advisory Contracts
[i]    Allocation and Aggregation of Investments
[j]    Trade Errors
[k]    Gifts and Entertainment
[l]    Outside Business Activities
§ 5.04    Registration with the CFTC
[1]    Commodity Pool Operators
[2]    Commodity Trading Advisers
[3]    Associated Person of CPO or CTA
[4]    Principal of a CPO or CTA
[5]    Registration Process
[a]    Fingerprinting
[b]    Proficiency Requirements for Associated Persons
[6]    Exemptions from CPO Registration
[a]    Overview
[b]    Rule 4.13(a)(3)—De Minimis Exemption
[i]    Non-Threshold Criteria
[ii]    Which Instruments Count for Threshold Tests
[iii]    Threshold Tests
[A]    5% Initial Margin Test
[B]    100% Net Notational Test
[C]    Application to Fund of Funds
[iv]    Filing to Claim the Exemption
[c]    Other CPO Exemptions
[7]    Commodity Trading Advisers
[a]    Registration Process
[b]    Exemptions from Registration
[c]    Exemptions from Certain Registrant Requirements
[i]    Rule 4.7—”Registration Lite”
[ii]    Offshore Commodity Pools
§ 5.05    CFTC Regulation of Registered and Exempt Commodity Pools, CPOs and CTAs
[1]    Position Limits
[a]    Generally
[b]    Exemptions
[c]    Aggregation
[d]    Updating Registration
[2]    Disclosure Document
[a]    CPOs and CTAs Not Qualifying for 4.7 Registration Lite
[b]    CPOS and CTAs Qualifying for 4.7 Registration Lite   
[3]    Reporting Requirements
[a]    Quarterly Statements to Investors
[b]    Annual Reports to Investors and the NFA
[c]    Forms PQR and PR
[4]    Recordkeeping
[5]    NFA Bylaws and Rules
[a]    Annual Self-Examination
[b]    Doing Business with Non-NFA Members
[c]    Prohibitions on Loans to Pool Operators
[6]    Ethics Training
§ 5.06    Marketing and Advertising
[1]    Advertising Practices
[a]    Testimonials
[b]    Past Specific Recommendations
[2]    Performance Advertising
[a]    Clover Capital No-Action Letter
[b]    Model Performance
[c]    Performance “Net of Fees” Requirement
[d]    Performance Advertising Record-Keeping Requirement
[e]    FINRA Rules Concerning Performance Advertising
[i]    Related Performance
[ii]    Target Returns
[iii]    Projected Returns
[iv]    Hypothetical and Backtested Per-formance
[v]    Risk Factors
[f]    Track Record Portability
[i]    Employee Track Record Portability
[ii]    Adviser Track Record Portability
§ 5.07    Offering of Fund Interests
[1]    Private Placement Exemptions from U.S. Securities Registration
[a]    Private Placement Provisions Generally
[b]    State Law Preemption
[c]    Regulation D
[i]    Accredited Investors
[ii]    Non-Accredited Investors
[iii]    Manner of Offering
[iv]    Limits on Resales
[v]    Post-Sale Filing
[d]    Regulation S
[i]    Offshore Transactions
[ii]    Directed Selling Efforts
[iii]    Issuer Safe Harbor
[2]    Investment Company Registration Exemptions
[a]    Comparison with Registered Vehicles
[b]    Investment Company Act Section 3(c)(1)
[i]    No Public Offering
[ii]    Not More Than 100 Beneficial Owners
[c]    Investment Company Act Section 3(c)(7)
[i]    Qualified Purchaser
[ii]    Knowledgeable Employees
[d]    Transfers and Transferee Suitability
[3]    Solicitation of Potential Investors
[a]    Use of Internal Personnel and Exchange Act Rule 3a4-1
[b]    Use of Broker-Dealer Placement Agents
[c]    State Broker-Dealer Regulations
[d]    Capital Introduction Services
[e]    Solicitation of Foreign Investors
[4]    Anti-Money Laundering Regulations/OFAC
[a]    Background
[b]    The AML Program
[c]    OFAC
[d]    FCPA
[5]    Applicability of Foreign Law Regarding the Offering of Securities
§ 5.08    Trading
[1]    Prevention of Insider Trading
[a]    Background
[b]    Material, Non-Public Information
[c]    Consequences of Insider Trading
[d]    Adopting Insider Trading Policies
[2]    Market Manipulation
[a]    What is Market Manipulation?
[i]    Section 9(a)(1)—Wash Sales and Matched Orders
[ii]    Section 9(a)(2)—Manipulative Transactions
[iii]    Sections 9(a)(3), (4) & (5)—Touting, Tipster Sheets and Other Decep-tive Inducements to Trade
[iv]    Section 9(a)(6)—Price Fixing
[b]    Anti-Fraud Provisions
[i]    Short Selling Rules
[ii]    Section 206(4) of the Advisers Act
[iii]    Examples of Manipulative Behav-ior
§ 5.09    Reporting of Fund Positions
[1]    Section 13 Reporting
[a]    Schedule 13D—Five-Percent Beneficial Owners
[i]    Calculation of Beneficial Ownership
[ii]    Formation of a “Group”
[iii]    Amendments
[b]    Schedule 13G—Qualified Institutional Investors and Passive Investors
[c]    Schedule 13F—Institutional Investment Managers
[d]    Schedule 13H
[2]    Form PF
[3]    Section 16 Reporting
[a]    Section 16(a)
[b]    Section 16(b)
[4]    Form SLT
[a]    Holding of U.S. Securities Issued by U.S.-Resident Pooled Investment Vehicles to Foreign Residents
[b]    Holdings of Non-U.S. Securities by U.S.-Resident Pooled Investment Vehicles
[c]    Holdings of Cross-Border Securities in Related Pooled Investment Vehicles
§ 5.10    Statutory Investment Limits
[1]    Investment Company Act Section 12(d)(1)
[2]    Bank Holding Company Act
[3]    Investments in Regulated Industries
[4]    Hart-Scott-Rodino Act
[a]    Reporting Requirements
[b]    Exemptions to Reporting Requirements
Fund Documentation
§ 6.01    Introduction
§ 6.02    Marketing Materials
[1]     Preliminary Investment Proposal
[2]     Pitch Books
[3]     Due Diligence Questionnaires
§ 6.03     Offering Memorandum
[1]     Contents
[2]    Supplements and Wrappers
§ 6.04    Fund Governing Documents
[1]     Operating Agreements
[2]     Formation Documents
§ 6.05    Ancillary Documents
[1]     Subscription Agreements
[2]     Investment Management Agreements
[3]     Side Letters
§ 6.06    Other Fund-Related Documentation
[1]     Seed Agreements
[2]     Transfer and Pledge Agreements
[3]     Confidentiality Agreements
§ 6.07    Management Company and General Partner
[1]     Operating Agreements
[2]     Employment Agreements
§ 6.08    Counterparty Arrangements
[1]     Placement Agreements
[2]     Administration Agreements
[3]     Brokerage Agreements
[4]     International Swaps and Derivatives Association Agreement
[5]     Custodial Agreements
[6]     Director's Services Agreements
Management Company Structures and Terms
§ 7.01    Introduction
[1]    Evolution of the Business Model: From Profit Sharing Arrangements to (Hopefully) Sustainable Franchises
[2]    The Challenges of Assets That Go Home Every Night
[3]    Central Themes in the Partnership Agreement
[4]    The Importance of an Executed Partnership Agreement
[5]    Consequences of Failing to Have a Partnership Agreement
§ 7.02    Legal Structure and Key Documents
[1]    Limited Partnership or Limited Liability Com-pany
[2]    Pyramid and Multi-Headed Structures
[3]    Who Should Be a Partner?
[4]    Employment Offer Letter and/or Admission Letter
[5]    Background Check, Confirmation of Identity and Eligibility
§ 7.03    Compensation
[1]    Overview
[a]    Senior Investment Professionals
[b]    Other Investment Professionals
[c]    Senior Managers
[d]    Middle Management and Other Employees
[e]    Founders
[2]    Vesting and Forfeiture
§ 7.04    Governance
§ 7.05    Protecting the Franchise: Restrictive Covenants
[1]    Post-Employment/Post-Association Restrictions
[2]    Restrictive Covenants
[a]    Confidentiality
[b]    Non-Competition
[c]    Non-Solicitation and Non-Hire of Firm Personnel
[d]    Non-Solicitation of Firm Clients
[e]    Forfeiture for Competition
[f]    Notice Periods (“Garden Leave”)
[g]    Non-Disparagement
[h]    No Publicity
[i]    Company Property and Work Product
[j]    Ownership of the Investment Track Record
§ 7.06    Payment Upon Termination/Withdrawal of a Partner
§ 7.07    Dispute Resolution
[a]    Choice of Law
[b]    Choice of Forum
Service Providers
§ 8.01    The Advantage of Using Service Providers
§ 8.02    Prime Brokers
[1]    Prime Brokers Generally
[a]    Multiple Prime Brokers
[b]    Counterparty Risk
[c]    Prime Broker Fees
[d]    Soft Dollars
[e]    Prime Brokerage Agreements
[f]    Disclosure of Key Terms of the Prime Brokerage Agreement
[g]    Selecting a Prime Broker
[2]    Prime Brokerage Services
[a]    Clearing and Settlement of Trades
[b]    Custodial Services
[c]    Securities Lending
[d]    Reporting and Research
[e]    Margin Financing
[f]    Order Routing and Customized Technology
[g]    Valuation
[h]    Trade Allocations and Managed Accounts
[i]    Consulting Services, Technology Support and Access to Office Space
[j]    Capital Introduction
§ 8.03    Executing Brokers
§ 8.04    Fund Administrators
[1]    Fund Administrators Generally
[a]    Fund Administration Fees
[b]    Fund Administration Agreements
[c]    Disclosure of Key Terms of the Fund Administration Agreement.
[2]    Administration Services
[a]    Back Office Services
[b]    Middle Office Services
[c]    Front Office Services
[d]    Investor Relations Services
[e]    Books and Records
[f]    Registrar and Transfer Agent Functions
§ 8.05    Placement Agents
[1]    Rules Governing Placement Agents
[2]    General Solicitation and Advertising
[3]    Suitability
[4]    Pay to Play
[5]    Placement Agent Compensation
[6]    Other Functions of a Placement Agent
[7]    Exclusive Versus Nonexclusive
§ 8.06     Platforms and Feeders
§ 8.07     Directors Service Providers
§ 8.08    Lawyers
§ 8.09    Auditors
§ 8.10    Gatekeepers
Seed Investors
§ 9.01    Overview
§ 9.02    Considerations When Entering into a Seed Investment
[1]    Considerations for Hedge Fund Managers
[2]    Considerations for Seed Investors
§ 9.03    Seed Investors
§ 9.04    Structure of a Seed Investment
[1]    Investment in a Managed Account
[2]    Investment in a Hedge Fund
[3]    Investment in a Satellite Fund
[4]    Other Strategic Investments
§ 9.05    Terms of a Seed Investment
[1]    Seed Investor Rights and Obligations
[2]    Participation in a Fund Manager's Business
[3]    Services Provided by a Seed Investor
[4]    Unwinding a Seed Investment
§ 9.06    Potential Conflicts of Interest; Regulatory and Compliance Considerations
    [1]    Conflicts of Interest
    [2]    Interference with Existing Business
    [3]    Aggregation Issues
    [4]    Regulatory Compliance
    [5]    Seed Investments with Regulated Entities
§ 9.07    Tax Considerations
    [1]    Overview
    [2]    Participation in Management Fees
    [3]    Participation in Incentive Compensation
    [4]    Reduced Fees/Offsets
    [5]    Participation in the Sale of a Fund Man-ager's Business
    [6]    Departure or Removal of a Seed Investor
United Kingdom Considerations
§ 10.01    Overview
§ 10.02    The Requirement for Authorization
[1]    The General Prohibition
[2]    Regulated Activities
[a]    Managing Investments
[b]    Advising on Investments
[c]    Arranging Deals in Investments
[d]    Dealing as Agent
[e]    Agreeing to Conduct a Regulated Activity
[3]    Specified Investments
[4]    By Way of Business
[5]    UK Place of Business
§ 10.03    Exemptions from Authorization
[1]    The Groups Exemption
[a]    Managing
[b]    Arranging
[c]    Advising
[2]    Alternatives to Authorization
[a]    Platforms
[b]    Appointed Representative Status
§ 10.04    Applying for FCA Authorization
[1]    Timescale
[2]    The Application Process
[a]    FCA Application Pack
[b]    Approved Persons (Individual) Applications
[c]    Other Requirements for Application
[d]    Regulatory Capital
§ 10.05    FCA Approved Persons Regime
[1]    Controlled Functions

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