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Why the Sec (and Congress) Should Recognize the 3(C)(1) Plus Exemption

Securities Regulation Law Journal, Vol. 37, No. 1, Spring 2009

16 Pages Posted: 9 Aug 2013  

Addison D. Braendel

Baker & McKenzie, LLP

Seth Chertok

Peking University School of Transnational Law

Martin Rosenberg

Townsed Group

Multiple version iconThere are 2 versions of this paper

Date Written: June 26, 2008

Abstract

Under the hypothetical 3(c)(1) plus exemption (“3(c)(1) Plus Exemption”), two core private equity funds, one of which is eligible for an exemption under Section 3(c)(1) and the other of which is eligible for an exemption under Section 3(c)(7), would be combined into a single Section 3(c)(1) exempt fund (“3(c)(1) Plus Fund”). The hypothetical 3(c)(1) Plus Fund would be limited to no more than 100 non-qualified purchaser “accredited investor” beneficial owners and an unlimited number of qualified purchaser beneficial owners, and would effectively allow parallel funds to operate as a single legal entity. The nature and quantity of beneficial owners in the 3(c)(1) Plus Fund would be exactly the same as in parallel 3(c)(1) and 3(c)(7) exempt funds, which in turn means that the 3(c)(1) Plus Exemption would continue to be a private Investment Company Act exemption. This article argues that the 3(c)(1) Plus Exemption is optimal from the perspective of Investment Company Act policy and is not contrary to relevant statutory interpretation principles. However, it notes that funds should not rely upon the 3(c)(1) Plus Exemption until it has been recognized by the Commission or introduced as future legislation by Congress.

Keywords: Private Equity Funds; Investment Company Act

Suggested Citation

Braendel, Addison D. and Chertok, Seth and Rosenberg, Martin, Why the Sec (and Congress) Should Recognize the 3(C)(1) Plus Exemption (June 26, 2008). Securities Regulation Law Journal, Vol. 37, No. 1, Spring 2009 . Available at SSRN: https://ssrn.com/abstract=2307132

Addison D. Braendel

Baker & McKenzie, LLP ( email )

United States

HOME PAGE: http://www.bakernet.com

Seth Chertok (Contact Author)

Peking University School of Transnational Law ( email )

China

Martin Rosenberg

Townsed Group

No Address Available

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