Dennis Pereira Quoted in Private Equity Law Report on Managing MNPI Risks

Private Equity Law Report has quoted Akin Gump investment management partner Dennis Pereira in the article “Simultaneous Management of PE and Private Credit Funds: Use of Walls and Other Tactics to Manage MNPI Risks (Part One of Two).” The first in a two-part series, the article identifies several measures that can curb the internal spread of material nonpublic information (MNPI), with a particular focus on whether and how information barriers can be used by managers.

The article says that private funds investing in the debt or equity of a company are entitled to legitimately obtained MNPI in the ordinary course of managing their investments. As a sort of firewall in conjunction with safeguards against the spread of MNPI, it notes, a firm can adopt a restricted list of companies in which certain individuals and teams at the firm are barred from investing. “As soon as someone is interested in potentially buying a security, it’s automatically added to certain tracking lists internally by compliance,” explained Pereira.

With walls operating as a two-way barrier, Pereira described a situation where a PE deal team identifies a company it is interested in acquiring. The first step, he said, is notifying compliance. “A junior-level compliance person should automatically follow-up and say, ‘The credit fund has exposure to the portfolio company you’re interested in purchasing. Let’s talk about it’,” Pereira explained. He went on to say, “Before things go to the investment committee, you flesh out everything going on. Simultaneously, the legal department thinks about any potential conflicts and whether they want to loop in fund counsel, tell the LP advisory committee, etc.”

In the end, no matter what form the wall takes, Pereira emphasized that “there needs to be a good paper trail about how the wall operates and thoughtful decisions about how strict you want it to be internally.”