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Brexit (and AIFMD), plus strange dealings at GPB

Brexit certainty, and the private equity market's very public year.

Brexit certainty (and AIFMD): Brexit and certainty are not words that will ever make sense together. But UK Prime Minister Boris Johnson’s election does mean one all-but-certain thing: Brexit will happen, probably in January and very possibly with a transition period ending in December 2020. In this article, Debevoise partners take a look at some of the likely effects that Johnson’s policies will have on, among other things, portfolio companies.

A short transition period, a government that doesn’t appear to have regulatory equivalence regimes high on its list of priorities, no plans to put EU laws onto UK statute books en masse … all of this spells potential chaos for pretty much everyone in finance, despite the widely publicized preparations many institutions have been making. (Nonetheless, a little bit more certainty sent UK stocks soaring on Friday).

Although UK PE firms have largely taken steps toward negating the effects of suddenly being thrust out of the EU’s Alternative Investment Fund Managers Directive regime, there is still a lot of uncertainty about how, for example, the ‘third-country passport’ option would work … or whether it’s even an option. To my knowledge, no country outside the EU has yet been granted it.

A very public year for a very private market: For our year in review, I detail the public scrutiny the private equity market has endured this last year, and discuss the industry’s response, as well as investors’ hopes for what that scrutiny might mean for transparency requirements, especially on fees and expenses. It was written just before the ‘other’ House hearing on private equity in November. You can read my analysis of that, here and here.

Strange dealings: Bill Myers of sister title Regulatory Compliance Watch and I have been working on the very strange scandal at GPB Capital Holdings. Everything about this story is just strange. This is the fund whose former CCO, Michael Cohn, has been indicted on charges that he leaked details of an SEC investigation into GPB while he was an enforcement agent at the agency in order to procure a job as the firm’s CCO. Numerous lawsuits have also been filed against the firm, its funds, people employed by and associated with it, affiliated companies and brokers who sold LP interests in its funds.

This story lays out some of the basic, circular dealings GPB – once heralded by the likes of Forbes and Inc as a ‘unicorn’ (although confusingly they seem to be describing AUM rather than firm valuation) – is accused of engaging in. It also provides some background on a mysterious connection between the firm’s head, David Gentile, and a Russian aluminum magnate who has been affiliated with other high-profile political and business scandals.