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NASD Interpretation on Related Performance Information

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  • Baker, John
    The NASD has announced in an interpretive letter that 3(c)(7) funds may include related performance information in sales materials. Letter to Yukako Kawata
    Message 1 of 1 , Jan 5, 2004
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      The NASD has announced in an interpretive letter that 3(c)(7) funds may include related performance information in sales materials. Letter to Yukako Kawata (Dec. 30, 2003). A 3(c)(7) fund is a private fund that is exempt from the Investment Company Act because all of its investors are qualified purchasers (in general, individuals with at least $5 million in investments or entities with at least $25 million in investments). The NASD took the position in October that related performance information (information about the performance of other funds or accounts managed by the same investment adviser or portfolio manager) may not be included in sales materials for hedge funds; the new interpretation is a substantial modification of the October position.

      The NASD response is somewhat different from what was requested: The inquiry letter, submitted on behalf of Credit Suisse First Boston, requested an interpretation that private equity funds may use related performance information. The NASD response was that both hedge funds and private equity funds may use related performance information, if they are 3(c)(7) funds and all recipients of the information are qualified purchasers. Based on our discussions with the NASD, we understand that that private equity funds that are not 3(c)(7) funds cannot use related performance information in sales materials. The NASD interpretative letter is available online at

      http://www.nasdr.com/2910/2210_12.asp

      For my prior post on the October letter, see

      http://groups.yahoo.com/group/FundLaw/message/818


      John M. Baker <JMB@...>
      Stradley, Ronon, Stevens & Young, LLP Http://www.stradley.com
      1220 19th Street, N.W., Suite 600, Washington, DC 20036
      (202) 419-8413 Fax (202) 822-0140
      FundLaw Listowner Http://groups.yahoo.com/group/fundlaw
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