August 2, 2004
I am submitting a question with respect to the definition of "private fund" that I hope the SEC will address in its next release on this issue. The third prong of the definition currently states that a private fund is a company "interests of which are or have been offered based on the investment advisory skills, ability or expertise of the investment adviser." Assume the fund meets all threeo requirements to be a "private fund" so that the IA will have to look through the fund and count its investors as clients. If the IA, however, contracts out to a subadvisory from time to time but information with respect to advisory skills, ability or expertise of the subadvisory is not included in information presented to potential clients, is the outcome here that the fund is a "private fund" vis-a-vis the IA but not vis-a-vis the sub-IA? Can the same entity have two such contradictory statuses. And if not which status governs (the IAs or the sub-IAs)? If the fund would be deemed a "private fund" for both, it seems to me that subIA is being forced to look through the fund eventhough the elements of the "private fund" definition are not really met with respect to the fund. Alternatively, is this issue avoided because the sub-IAs client is considered to be the IA itself?
Thank you for your consideration of this question.
Richards Spears Kibbe & Orbe LLP
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New York, New York 10281-1003
Phone: (212) 530-1808
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