Regulatory Issues Specific to Direct Investing While coinvestments with…

Regulatory Issues Specific to Direct Investing While coinvestments with other family offices or private equity funds may make financial and business sense, family offices and private equity funds that partake in those activities should be mindful of the risks associated with pooling capital with others. The first set of issues to consider are the regulatory issues related to wheeling and dealing in the private capital space. Any person or entity that is in the business of raising capital generally needs to be registered as a "broker-dealer" with the SEC or applicable state agency or else be exempted from those registration requirements. While private equity funds can raise capital for their own funds by relying upon Rule 506(b) of Regulation D of the Securities Act of 1933, that exemption doesn't necessarily allow them to help raise money for other companies. To the extent that a private equity fund manager regularly solicits others to coinvest along with their fund, they may be required to register as broker-dealers. The same is true for a family office that regularly solicits other family offices to make coinvestments.

— from The Flight Plan (Purpose/Wisdom/Risk) · *Family Office: A Comprehensive Guide for Advisors, Practioners, and Students by William I *

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