Subject: Re: Ropes & Gray LLP: SEC Issues Broker-Dealer No-Action Letter of Interest to Private Equity Firms
From: "Devon Archer" <[email-masked]>
To: "Eric Schwerin" <[email-masked]>
Cc: "Hunter Biden" <[email-masked]>
Date: Wed, 12 Feb 2014 11:29:07 -0500

It's still on my bedside table.  about 25% of the way through.

On Wed, Feb 12, 2014 at 11:02 AM, Eric Schwerin <
[email-masked]> wrote:

> I will of course play the role of the risk averse contrarian but my read
> of this is that it only relates to referral fees if the investment is made
> for 25% or more of a company or investment (see the qualification, "if the
> active operation requirement is met through governance arrangements").
>
> That is, a $1m investment into a blind pool wouldn't count unless it was
> for more than 25% of the GP.
>
> But, if RSTP wanted to do investment banking for Counsyl and raise money
> for someone to buy 25% or more of the company, Counsyl could pay RSTP an
> investment banking fee for doing so and RSTP wouldn't have to do it through
> a BD.    To me, it also would mean that RSTP could pay a referral fee to a
> third party who identifies the money for the transaction.
>
> So I wouldn't throw out the book just yet, Devon.  :-)
>
>
>
> Eric D. Schwerin
> [email-masked]
>
> Sent from my iPhone
>
> On Feb 12, 2014, at 9:48 AM, Hunter Biden <[email-masked]>
> wrote:
>
> "Many private equity firms rely on consultants, finders and other persons
> for referrals to possible investment and acquisition targets. Compensation
> for these referrals typically depends on the consummation of the
> transaction, which, under the SEC's longstanding position, raised the issue
> whether persons making referrals should be registered as broker-dealers. In
> these circumstances, the question for private equity firms was whether they
> had exposure for facilitating transactions by an unregistered
> broker-dealer. The M&A Broker no-action letter addresses this concern, at
> least for referrals by persons meeting the requirements of the letter. In
> addition, the letter's approach to the requirement of buyer control and
> operation of the target suggests that *private fund sponsors could pay
> referral fees to M&A Brokers not only in transactions resulting in the
> transfer of the entire ownership interest of the target, but also in
> certain types of minority and venture capital investments*, if the active
> operation requirement is met through governance arrangements."
>
> This seems to suggest that a third party can be paid a referral fee for
> raising money not only for a specific deal but for the funds' blind pool.
>
> R. Hunter Biden
> Rosemont Seneca Partners
> Washington D.C.
> 202-333-1880
>
>
>
> On Feb 12, 2014, at 6:44 AM, Devon Archer <[email-masked]>
> wrote:
>
>
> http://www.ropesgray.com/news-and-insights/Insights/2014/February/SEC-Issues-Broker-Dealer-No-Action-Letter-of-Interest-to-Private-Equity-Firms.aspx
>
>
> Devon Archer
> 646 436 3745
>
>