Capital introduction: Difference between revisions
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{{a|pb|}}The tricky business, engaged in by the “consultancy” arm of a modern [[prime broker]], of putting investors and investment managers together without looking like it was anything to do with you. | {{a|pb|}}There was an urban legend in my town when I was growing up about a guy who had the idea of renting out a room in student flat where they — and all their buddies —could all go with their respective BFFs and GFFS for a bit of slap-and-tickle away from their parents’ prying and judgmental eyes. It all seems so quaint now, doesn’t it. A room in a flat back then cost forty bucks a week, and there were enough randy six formers in town that the place was constantly in use and no-one had to pay more than a fiver and he made a tidy profit. | ||
Anything wrong with this? Ask no questions, tell no lies — in the good old days, you’d say maybe no, but nowadays not so much. The guy on the lease eventually got rumbled and was expelled from his school on the gloriously bombastic grounds of “''operating a brothel during school hours''”. Note, fellow lovers of [[The Victory of Form over Substance|form over substance]], that it was not renting the place ''per so'' that sunk him, but doing it ''during double biology'' — fnarr fnarr — if you catch my meaning. | |||
What has all this to do with the honourable practice of [[capital introduction]]? Well: the accruing benefits to the introducer are equally tangential, and the formal risks of getting your shape wrong just as catastrohic. “'''Cap intro'''” is the tricky business, engaged in by the “consultancy” arm of a modern [[prime broker]], of putting prospective investors and putativve investment managers together — getting them a room, if you like — without looking like it was anything to do with you. | |||
The name of the game is avoiding looking like a “[[placement agent]]” (that is, appearing to be marketing the fund's securities and thereby taking on [[prospectus liability]]) and to avoid your activity inadvertently bringing the fund in scope for local regulations on hedge funds in a potential investor’s jurisdiction, to which it would not otherwise be subject, and which might apply if it were thought to be offering its securities directly in that locale. Like {{tag|AIFMD}}, for very good example. | The name of the game is avoiding looking like a “[[placement agent]]” (that is, appearing to be marketing the fund's securities and thereby taking on [[prospectus liability]]) and to avoid your activity inadvertently bringing the fund in scope for local regulations on hedge funds in a potential investor’s jurisdiction, to which it would not otherwise be subject, and which might apply if it were thought to be offering its securities directly in that locale. Like {{tag|AIFMD}}, for very good example. | ||
Revision as of 12:29, 5 May 2021
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Prime Brokerage Anatomy™
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There was an urban legend in my town when I was growing up about a guy who had the idea of renting out a room in student flat where they — and all their buddies —could all go with their respective BFFs and GFFS for a bit of slap-and-tickle away from their parents’ prying and judgmental eyes. It all seems so quaint now, doesn’t it. A room in a flat back then cost forty bucks a week, and there were enough randy six formers in town that the place was constantly in use and no-one had to pay more than a fiver and he made a tidy profit.
Anything wrong with this? Ask no questions, tell no lies — in the good old days, you’d say maybe no, but nowadays not so much. The guy on the lease eventually got rumbled and was expelled from his school on the gloriously bombastic grounds of “operating a brothel during school hours”. Note, fellow lovers of form over substance, that it was not renting the place per so that sunk him, but doing it during double biology — fnarr fnarr — if you catch my meaning.
What has all this to do with the honourable practice of capital introduction? Well: the accruing benefits to the introducer are equally tangential, and the formal risks of getting your shape wrong just as catastrohic. “Cap intro” is the tricky business, engaged in by the “consultancy” arm of a modern prime broker, of putting prospective investors and putativve investment managers together — getting them a room, if you like — without looking like it was anything to do with you.
The name of the game is avoiding looking like a “placement agent” (that is, appearing to be marketing the fund's securities and thereby taking on prospectus liability) and to avoid your activity inadvertently bringing the fund in scope for local regulations on hedge funds in a potential investor’s jurisdiction, to which it would not otherwise be subject, and which might apply if it were thought to be offering its securities directly in that locale. Like AIFMD, for very good example.