Need To Know: Regulators Set To Unveil Volcker Rule

Regulators Set To Unveil Volcker Rule
The Federal Deposit Insurance Corp. was scheduled to release its much-anticipated Volcker Rule on Oct. 11, which would ban most proprietary trading at banks and limit their involvement with private equity.

A lobbyist for the private equity industry said the release should provide guidance on several issues important for private equity, including the ability of foreign banks to invest in private equity funds sponsored by U.S.-based firms but marketed exclusively to foreign investors; banks’ ability set up “feeder funds,” or funds for bank clients that are not using bank capital; whether bank-affiliated pension plans can invest in private equity funds; and whether insurance companies can invest in private equity funds through their general and separate accounts. The proposed rule will then be subject to a comment period.

The deadline for those comments could be Dec. 16, according to a recent report in The Wall Street Journal.

PE Needs To Fight Corruption Harder

Private equity firms should conduct more thorough anti-corruption due diligence and more actively enforce anti-corruption rules at companies they pursue and already own, according to a recent report by attorneys at the law firm Gibson Dunn & Crutcher LLP. The cause for concern is heightened enforcement of the Foreign Corrupt Practices Act, which they note “has grown exponentially in recent years.”

Historically, buyout firms shied away from conducting pre-acquisition anti-corruption due diligence and avoided imposing their own anti-corruption standards on companies to avoid the appearance that they were tightly controlling affairs of their companies in the hopes of avoiding liability should illegal activity, such as bribery, happen. That’s no longer prudent, the report said.

The report suggests, among other things, that firms should ask questions to assess a potential target’s exposure to, and contact with, government-related entities; to determine if the company has written anti-corruption policies; and to determine if it’s ever been investigated or prosecuted for bribery or corruption.

PE Execs Find New Regs Difficult: Survey

More than half, or 51 percent, of the buyout industry executives responding to a recent survey said that complying with new regulatory standards is a “difficult, time-consuming process,” according to results recently released by the U.S. audit, tax and advisory firm KPMG. Thirty one percent described the process as “mildly intrusive,” while 17 percent said it was a non-issue. The survey also found that energy would be the most attractive industry to invest in over the next year, with 38 percent, followed by health care, with 19 percent; financial services, with 15 percent; social media, with 14 percent; and real estate, with 13 percent. The survey, conducted at a recent conference, had a range of 151 to 95 responses per question.