Compliance for Secondaries Funds: Transfer Restrictions, Regulatory Approvals, and Multi-Fund Oversight

Secondaries fund compliance addresses unique requirements from acquiring existing LP interests subject to fund document transfer restrictions and GP approvals, coordinating with multiple underlying fund GPs across diverse compliance frameworks, managing regulatory transfer requirements when applicable, and maintaining compliance across inherited portfolio company exposures acquired through LP stakes. CCOs must understand transfer mechanics, GP consent processes, regulatory filing obligations, and ongoing multi-fund compliance coordination.

LP Interest Transfer Compliance

LP interest acquisitions require navigating fund document transfer provisions. Most funds require GP consent for transfers with GPs evaluating buyer qualifications, potential conflicts, and administrative burden. The CCO coordinates transfer approval processes submitting required information, addressing GP questions or concerns, and tracking approvals across multiple transactions. Some funds impose right of first refusal giving existing LPs or GPs purchase rights before external sales. Compliance includes notifying required parties, managing ROFR periods, and coordinating if rights are exercised.

Regulatory Transfer Requirements

Certain LP interest transfers trigger regulatory requirements. Transfers of interests in funds holding regulated entities may require regulatory approvals from banking, utility, or communications regulators. HSR filings may be required when transaction values exceed thresholds. Foreign investment regulations including CFIUS review may apply to non-US buyers acquiring interests in funds with sensitive portfolio companies. The CCO identifies applicable requirements, coordinates filing preparation, manages regulatory communications, and tracks approval timing affecting closing schedules.

Multi-GP Compliance Coordination

Secondaries funds holding LP stakes in numerous underlying funds must coordinate compliance across multiple GPs each maintaining their own policies. Annual compliance questionnaire responses for each underlying fund, subscription document updates when fund terms change, beneficial ownership reporting for funds requiring transparency, and side letter compliance when secondaries buyers negotiate terms create ongoing coordination requirements. The CCO maintains organized tracking of obligations across portfolio, establishes response procedures and timelines, and coordinates with underlying fund administrators and GPs.

Key Takeaways

• GP consent is typically required: Fund documents usually mandate GP approval for LP transfers requiring submission of buyer information and qualification materials.
• Transfer restrictions must be navigated: ROFR provisions, lock-up periods, and consent requirements create compliance complexity requiring systematic management.
• Regulatory approvals may be necessary: Transfers involving regulated entities, large values, or foreign buyers may trigger regulatory filing and approval requirements affecting timing.
• Multi-fund coordination is ongoing: Holding LP stakes in multiple funds creates continuous compliance obligations across diverse GP requirements and timelines.