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‘Foreside 3(c)-1 Letter’ Offers Expanded Guidance from FINRA on Use of Related Performance for 3(c)-1 Private Equity Funds

Navigating compliance around sales and marketing materials can be tricky for SEC registered advisors and broker-dealers. However private equity funds that strategically partner with the right regulatory consultant have the unique opportunity to forge new pathways and create value for institutional investors that, to date, has been largely unheard of.

Foreside is proud to have partnered with our clients to introduce the Foreside 3(c)-1 Letter, an interpretive guide offering a new level of transparency for institutional investors. Drafted with FINRA’s oversight, the letter allows 3(c)-1 exempt private equity funds to disclose performance of related accounts within marketing communications. This guidance applies to the institutional investor restricted marketing communications for unregistered offerings relying on the 3(c)-1 exemption from the 1940 Investment Company Act. This letter provides asset managers with an improved way to demonstrate value to potential investors, while meeting investors’ demands for increased transparency.

This is not the first time Foreside has advocated on behalf of our clients by requesting FINRA expand its rule on the use of certain related performance metrics in institutional material. In early 2019, Foreside helped earn an allowance for mutual funds to include pre-inception index performance in institutional investor restricted marketing communications as well.

This type of regulatory innovation is essential to stand out from the crowded landscape, according to David Whitaker, President of Foreside.

“Institutional investors are requesting more data like performance metrics from related accounts to evaluate their investment decisions. We heard from our clients in the private equity space that 3(c)-1 exempt private funds were previously hamstrung by older interpretive letters and that they were being competitively hindered as a result,” David said. “Too often institutional investors and compliance consultants accept the status quo and miss ways to add value for clients. We are pleased to be able to turn something initially seen as an obstacle into an opportunity for innovation.”

Foreside partnered with our clients and FINRA to complete the expansion of this guidance.

View the full list of interpretive letters from FINRA HERE