VIEWS: 10 PAGES: 7 CATEGORY: Financial Models POSTED ON: 1/28/2013
Transparency Best Practices for Hedge Fund and Investment Companies Presentation
Transparency Best Practices for Hedge Fund and Investment Companies •William Woolverton brought a broad understanding of legal and executive considerations to the discussion, drawing on his years of service to Gottex, Putnam Investments, and other major corporations. Following is what he had to say. •Many managers ask whether they need to disclose a company’s substantive disciplinary episode (for example, a United States Securities and Exchange Commission inquiry) to an investor in the due diligence questionnaire. In an October 13, 2011, interview, financial executive and attorney William Woolverton discussed a variety of operational due diligence issues with the Hedge Fund Law Report. A portion of the publication’s conversation with Woolverton, formerly of Putnam Investments and the current Senior Managing Director and General Counsel in the Boston office of leading international fund of funds investment company Gottex Funds Management, covered several matters involving transparency. •Because of the serious nature of such an incident, the company should disclose it, regardless of whether the investor asks and even if the SEC did not open a formal investigation. •More and more investors are expecting such transparency about any regulatory actions, and it is best to be forthcoming. •Another frequent question: What can a company expect its potential investors to look for during an on-site visit? •Although financial data can be easily transmitted electronically, experienced investors expect to visit a company and sit down for a frank face-to-face talk with its management. •Investors tend to focus on checking management credibility, viewing real-time operations, and hoping to see a flexible and responsive team that can handle any stress tests that the investors opt to conduct. •Managers also want to know how to answer due diligence questionnaires that focus on confidential or proprietary information. •Typically, the request for proposal (RFP) allows an applicant to state that some items fall under the heading of “trade secrets” and provides assurance that the investor will not disclose such information. •Being upfront during the negotiating process of an RFP and coming to an agreement that certain disclosed information must be kept confidential is the best course of action.
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