Article
WHY COMPLY?
by Jessica Greer
For an emerging fund manager, compliance can be an area of low priority due to time and cost constraints. A common rationale for this low prioritization is, “I’ll address it when I need it.”
As a private fund managing under $25 million in assets, you are not required to file as a regulated fund with the SEC. While you may welcome the exemption from rigorous regulatory burdens as a new fund, not being mindful of your obligations can be a costly mistake now and can be an obstacle to your long-term growth later.
Investing the thought, time, and energy into developing a sound and comprehensive compliance program ensures that your operations support your goals for growth. Here are a few tips to help you better focus your efforts as you grow your fund.
Avoid developing bad habits that could cause problems in the future.
The devil is in the details. Implementing sound document retention and recordkeeping practices now will better equip you to meet the standards set forth by regulatory bodies later. Organize your files in a consistent and efficient manner so that when it comes time to find that executed LPA, side letter, or brokerage statement from 2017, you know just where to find it.
Document everything. Are you tracking your PPM recipients? An excel spreadsheet is a simple solution. Are you saving communications with your investors and prospects? Archiving software is a turnkey and economical way to check this box.
Consider developing a calendar to track necessary filing dates to make sure you are not neglecting your obligations, like Blue Sky filings, Form D amendments, and annual report filings. You will find that this calendar will only fill as you grow, so get it right from the start.
Operational de-risking supports your fundraising abilities.
While risk is inevitable when it comes to investing, it behooves you to do everything you can to minimize risk inside and outside of the portfolio. A firm that operates according to the principles and activities outlined in its core operating documents shows its investors its commitment to long-term growth. Do you have these?
Policies and Procedures
Code of Ethics
Business Continuity Plan
Cybersecurity Plan
Due Diligence Questionnaire
Consider structuring valuation, risk management, investment, and management committees to provide valuable review and oversight on the activities of your business. Your commitment to transparency and accountability will set you on the path to success.
Don’t put off today what you will have to do tomorrow.
Whether you are running a strategy with scalability to $50 million, $100 million, or beyond, compliance and registration are inevitable. When your assets under management reach $25 million, you are required to file as an exempt registered advisor with the SEC; at $100 million, full registration is required. And in order to get there, you’ll need to ensure that your operations help attract the capital to grow. There is no time like the present to get your operations on track.
Willow Oak’s Fund Management Services (FMS) can help.
Working with fund managers to develop, implement, and manage comprehensive compliance programs, Willow Oak FMS focuses on the details of operations and compliance so that managers can stay focused on investing.
Jessica Greer is vice president of Willow Oak Asset Management and leads all Fund Management Services for Willow Oak. With two decades of experience building and managing strategic operations and development programs in the public and private sectors, Jessica is adept at taking a fund from concept through execution, providing invaluable operational leadership through every phase of the fund's operations and development. Jessica is a graduate of Loyola University Maryland.
Jessica can be reached at jessica@willowoakfunds.com.