MFA Letter to SEC on Proposed Standard of Conduct for Investment Advisers

On March 22, MFA submitted a letter to the SEC in response to the Institutional Limited Partner Association (ILPA) letter on the SEC’s proposed interpretation of the standard of conduct for investment advisers. In the letter, MFA explains that many of the recommendations made in the ILPA Letter relate primarily to the terms of agreements between advisers and the underlying institutional investors in private funds and fall outside the scope of the proposed interpretation. The recommendations pertain to issues that are the subject of negotiations between advisers and sophisticated investors as part of the due diligence process conducted investors prior to subscribing for an interest in a private fund. The letter also explains that the Heitman Capital Management no-action letter, which involves the use of a hedge clause and non-waiver disclosure in an investment advisory agreement with sophisticated clients, does not address the scope of an adviser’s fiduciary duty, and recommends that the SEC not rescind the letter.