NYPPEX Issues Comment Letter to the SEC Regarding Proposed New Rules for Private Funds

NEW YORK, March 7, 2022 /PRNewswire/ -- NYPPEX, one of the world's leading providers of secondary private equity liquidity and data, today made available highlights from its Comment Letter to the U.S. Securities and Exchange Commission regarding the SEC's proposed new rules for private funds.

Based on its survey to approximately 2,300 limited partners in private equity funds and private fund attorneys, below are NYPPEX recommendations to enhance protections to investors as well as private funds. 

1. SEC's Proposed Rule Regarding Advisor-Led Secondary Transactions.
   a)  NYPPEX recommended an exemption for private funds under $250 million with private wealth limited partners – that a fairness opinion not be required as proposed by the SEC as a fairness opinion would be cost prohibitive for smaller funds.
   
   
   b)  NYPPEX recommended that fairness opinions include both Terms as well as Price - as these deals are generally complex even for sophisticated investors to understand.
   
   
   c)  NYPPEX recommended an exemption for competitive bidding processes - that a fairness opinion not be required as proposed by the SEC if the secondary buyers have been selected through a competitive bidding process with 3 or more bidders.
   
   
2. SEC's Proposed Rule on Fiduciary and Conflicts Responsibilities
   a)  NYPPEX recommended that private funds should not be bound by state securities regulations that conflict with federal securities regulations
   
   
   In general, NYPPEX agrees with the SEC's proposed new rule that advisors to private funds have a fiduciary and conflict of interest duty to follow both state securities regulations and federal securities regulations; provided however that a state's securities regulation does not conflict with a federal securities regulation.
   
   
   For example, in the State of New York, NYPPEX believes that the Office of the New York Attorney General is under the mistaken view that private fund investments in affiliates are "self-dealing" and fraudulent under the New York State Martin Act - which has an extraordinarily low threshold because it does not require scienter – a showing of knowledge and specific intent to deceive, as is required to establish fraud under common law.
   
   
   Whereas SEC federal rules 17a-6 and 17d-1 finalized on February 24, 2003, expanded the exemption for investment companies and funds to make investments in affiliates.
   
   
   Accordingly, NYPPEX recommended an exemption be provided that if a state and federal   securities regulation is in conflict, the federal securities regulation is to be followed by private funds.

NYPPEX believes its recommendations will provide greater protections to private wealth     clients, institutional investors as well as sponsors of private funds.

About NYPPEX Holdings

NYPPEX Holdings operates a global private marketplace that provides price data and the opportunity for qualified investors to access secondary liquidity in alternative investment funds and in private companies in a fair and ethical manner. Its clients include alternative investment funds, financial institutions, endowments, foundations, institutional investors, family offices, private clients and their respective advisors worldwide.

Since 2004, the NYPPEX QMS™ has been formerly recognized by the U.S. Internal Revenue     Service as a Qualified Matching Service for private partnerships though a private letter ruling under Internal Revenue Code §1.7704.

Its private securities are privately offered only to qualified investors through NYPPEX, LLC and only in jurisdictions were permitted. NYPPEX is regulated in the U.S. by the SEC and FINRA. Member FINRA, SPIC.

Disclosure: This information is market commentary by NYPPEX and is not a solicitation of private securities transactions which may only be done through private offering documents and in jurisdictions where permitted. Investors should not rely on the information in this commentary as the basis for making investment decisions. This commentary is provided for informational purposes only. You are strongly encouraged to consult with your own independent advisors regarding any issues discussed in this commentary.  

Private placements are illiquid, speculative and investors may lose their entire investment.

For more information, please visit www.nyppex.com or contact [email protected] or by phone at +1 (914) 305 2825 in the United States, +41 43 508 7280 in Europe or +65 3158 1383 in Asia.

Media Contact:
Jeremy Kim
917.334.7658
[email protected] 

SOURCE NYPPEX Private Markets