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Marco Masotti Discusses New SEC Funds Rules With Private Equity International

March 22, 2022

Private Funds Group Global Co-Head Marco Masotti spoke with Private Equity International about the SEC’s proposed new rules that would prohibit all fund sponsors from engaging in certain practices the SEC deems to be contrary to the public interest and protection of investors. In “GPs to bear higher execution risk under latest SEC proposals,” Marco discusses the elements of the proposals that are most concerning to general partners, particularly the SEC’s desire to become involved in indemnification and exculpation, which would change the nature of the private equity industry.

"GPs are, after all, making primarily illiquid control investments in portfolio companies in sometimes high-risk industries, and the indemnification and exculpation provisions are another version of [an] insurance policy that protects them so that they can take risk and generate the kinds of returns that they have promised to their investors," Marco said. "Once you change that standard of care, you're changing how GPs function and the intended benefits of the business to investors.”

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