USA Law and Practice Contributed by: Bill Sturman, Matthew Holt, Steven Starr and Cliff Cone, Clifford Chance
Investor Interests Investors in limited partnerships or LLCs gen - erally hold limited partnership interests or LLC membership interests representing a proportion - ate share of the assets of the partnership or LLC. Limited partnership interests and LLC member - ship interests are not generally represented by shares or certificates in the same manner as interests in corporate entities. 2.1.2 Common Process for Setting Up Investment Funds Registration/Approval Requirements An alternative fund offered in the United States as an exempt private placement is not gener - ally required to register or obtain approval prior to marketing to investors or accepting com - mitments from investors. That said, the invest - ment adviser may separately be subject to a registration requirement with the Securities and Exchange Commission (SEC) or relevant state regulator in order to engage in an investment advisory business in the United States unless an exemption from registration is available, as discussed in 2.3.3 Local Regulatory Require- ments for Non-Local Managers . Once the fund begins accepting investors, the fund will be required to make a public notice filing on Form D if the fund is relying on the exemption provided by Regulation D discussed in 2.2.3 Restrictions on Investors . The Form D is due no later than 15 days after the date the first investor has made an irrevocable commit - ment to invest in the fund, unless the fund has opted to pre-file in advance of the closing date. The Form D requires the fund to disclose basic details regarding the offering, including the name and address of the fund and its control persons, the name and address of any placement agents retained in respect of the fund, and the aggre - gate dollar amount of interests sold to date.
Additionally, counterpart filings may be required in states where investors are domiciled under applicable “blue sky” laws of each state. Key Documentation While there are no strict requirements regarding the documents required to offer an alternative fund to accredited investors in the United States, the following key documents typically govern the offering and the fund’s terms. • Private Placement Memorandum: There is no prospectus requirement with respect to private placements. However, it is common practice for alternative funds to issue a pri - vate placement memorandum or similar offer - ing document to provide information regard - ing the fund sponsor, the fund’s investment strategy, the relevant market, risk factors and conflicts of interest, and other important infor - mation relevant to a decision to invest. See 2.3.6 Rules Concerning Marketing of Alter- native Funds for a discussion of rules relating to the content of offering documents. • Operating Agreement: The fund will have an operating agreement (often either a limited partnership agreement or LLC agreement) that governs ongoing terms of the fund as between the fund sponsor and the investors, including with respect to investment restric - tions, economic terms, payment of expenses, investor governance rights, resolution of con - flicts of interest, and periodic reporting and notice requirements. • Subscription Agreement: In order to sub - scribe for an interest in the fund, investors are typically required to execute a subscription agreement (and complete a related question - naire) confirming the amount of the investor’s commitment to the fund and certain other rel - evant matters, including the investor’s agree - ment to be bound by the terms of the operat -
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