SJ Berwin comments on selling private equity funds

10 July 2004

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A recent release from SJ Berwin has studied the problems encountered navigating the myriad rules that restrict fund promotion within Europe. The law firm specifies that selling a fund requires advice from several different sets of lawyers as European lawmakers want to protect investors from asset classes with which they may be unfamiliar, or for which they may not be suited. But the differences across Europe are striking, and the need for harmonisation is clear.The European Private Equity and Venture Capital Association (EVCA) has just published a 136-page guide to the 'Legal and Regulatory Aspects of Marketing and Promoting Private Equity Funds Across Europe'. This recent paper covers the rules that apply to the promotion of funds in 14 European countries and in the US, and it highlights the significant differences that exist between countries. Much depends on the structure that is used (rather than the underlying nature of the investments that are being sold), and the rules on marketing to high-net-worth individuals can be particularly difficult to deal with.There are moves in some European countries - including, for instance, the UK - to liberalise the rules on marketing to high-net-worth and sophisticated investors, and there are indications of tentative moves towards a self-certification regime similar to that which already operates - apparently satisfactorily - in the US. SJ Berwin states that such moves are to be welcomed and encouraged, since they would make the existing (cumbersome) rules much easier to operate in practice.But despite that limited progress, and even though there is already some pan-European legislation on the subject, there is a very long way to go before rules on promotion are coherent and consistent across Europe. In the meantime, those rules are another bureaucratic hurdle for fund managers to leap.