Term Sheet

The latest on private equity, M&A, deals and movements — from Wall Street to Silicon Valley

Private equity marketing rules, schmarketing rules

November 15, 2012: 3:43 PM ET

Not all private equity firms keep fundraising close to the vest.

FORTUNE -- Private equity firms aren't supposed to talk publicly about fundraising. Not because it's considered impolite, but because the Securities and Exchange Commission a longstanding rule that bans such blabbery.

Not everyone, however, seems to care.

Take Josh Harris, co-founder and senior managing director with Apollo Global Management (APO). During a keynote speech this past Tuesday at the BoA Merrill Lynch Banking and Financial Services Conference, Harris said:

"I'm pleased to announce that we are launching this week our next flagship private equity fund, Apollo Fund VIII, that will have a $12 billion target. We expect to be in the market shortly."

It was an invite-only event, but it would be straining credibility to imagine that Harris had a personal relationship with each of the 375 attendees, and knew them each to be accredited investors (possible exemptions to the rule). Or that Apollo already has identified all prospective investors in the new fund (another exemption). And even if those requirements were fulfilled, Apollo posted audio of the speech on its public website.

But Harris is hardly alone. Here is Scott Nuttall of Kohlberg Kravis Roberts & Co. (KKR) during the firm's most recent earnings call:

"Regarding Asia II, recall that last quarter we announced a $3 billion first close which is also faster than we would have originally thought. We've seen interest grow and are now at $4 billion of capital raised to date. We've set a hard cap for the fund at $6 billion, including the GP commitment, and we have a strong pipeline."

Or Stephen Schwarzman, during The Blackstone Group's (BX) Q2 2012 earnings call:

"We invested approximately $450 million in the quarter from these strategies, and our first Rescue Lending Fund is approximately two-thirds invested. While there are recall provisions that will extend the capital availability somewhat, we've commenced fundraising for our second Rescue Lending Fund, which we believe should be quite successful."

Or David Rubenstein, during The Carlyle Group's (CG) Q3 earnings call:

"Carlyle Partners VI, our flagship U.S. buyout fund, is the fund about which we are asked the most for it is our largest fund in the market. It is targeted at $10 billion. We are on pace to achieve our size, goal and also to do so on the schedule we set out for this fund."

How are these comments not violations of the SEC's anti-solicitation rules? Is there some sort of exemption for publicly-traded firms? Unlikely, given that the SEC hasn't changed its language since PE firms began listing. There were changes made as part of the JOBS Act but, to date, they remain in limbo until the SEC gets around to reading nearly 200 comments on the matter.

To be sure, I'm not arguing for some sort of censure here. The rules are absurdly antiquated and the JOBS Act changes will be welcome. But in my years covering the business, I've never seen so many high-profile firms seem to disregard them so blatantly.

Sign up for Dan's daily email newsletter on deals and deal-makers: GetTermSheet.com

Join the Conversation
About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

Email a Tip | @danprimack | RSS
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.