Side letter uncertainties and the FSA

Wed Apr 4, 2007

Tim Pearce, senior associate, Simmons & Simmons

2006 was a year of much discussion between the UK's Financial Services Authority (FSA) and the hedge fund industry regarding side letters. After initial alarm from the industry at the FSA's attitude to side letters, as set out in a Feedback Statement issued in March 2006, a clear and workable approach towards side letters emerged following much consultation with the FSA.

In its March Feedback Statement, the FSA proposed that each time an FSA-regulated hedge fund manager entered into a side letter with an investor in one of the fund manager's funds, the hedge fund manager had to disclose to all other investors in that fund the fact that a side letter had been entered into, and manage any arising conflicts of interest (or, if the investors were not customers or clients of the firm, seek to assist other parties in managing their conflicts)....

ISSN: 2151-1845 / CDC10004H

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