Yuliya Oryol Discusses Concerns on Fund Documents and Outside Counsel Provided by Consultants

10.30.2020
The Regulatory Fundamentals Group's Weekly Roundup

Yuliya Oryol was quoted in the article, “Fund Documents and Outside Counsel Supplied by the Consultant,” which was featured in The Regulatory Fundamentals Group’s Weekly Roundup newsletter.

The article examines how a number consulting firms that chose to “supply investment management and advisory services also package in legal review of fund documents—either with the consultant’s in-house staff, or outside counsel retained and controlled by the consultant.”

The article notes that Nossaman has expressed a number of “serious concerns” about the practice, including that “the legal advice may not be unbiased, and that there are potential conflicts of interest with respect to the consultant and its other clients. Further, the investor and the lawyer may not have an effective attorney-client relationship, nor attorney-client privilege, and the investor may not know what the legal fees are nor the exact terms that the consultant’s counsel is negotiating with fund counsel. “

Additional concerns from Nossaman include inherent conflicts of interest in such setups. “It is still questionable whether the counsel is able to stay impartial vis-à-vis the investment recommendations made by the consultant, given that legal counsel was retained by such consultant to provide the legal services in support of the investment recommendations provided by the consultant’s firm.” The Firm asks if “[i]t is questionable whether counsel in that position can recommend against key provisions of the proposed transaction if the consultant, which engaged counsel, favors those terms or perhaps failed to sufficiently address the terms in its recommendation to the clients?”

Commenting for the article, Yuliya added that “Even if a consultant’s counsel performs an initial review of investment documents, carefully vetted independent legal review is critical for each investor…The areas we discussed are even more critical today when some third party vendors are offering investors quick and cheap review of fund documents using proprietary technological methods instead of thorough review and skilled negotiation of fund terms by experienced and independent investment counsel. As attractive as these review tools may appear, investors need to be sure that they are not comparing apples to oranges.”

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