Illinois Bill Targets Private Equity on Fee Transparency, Contract Terms

A new bill, filed on Tuesday by Illinois Sen. Daniel Biss, aims to make private equity agreements more LP-friendly.

HB6292 bears resemblance to a recent California bill, but goes even further.

Naked Capitalism describes the bill:

It is a vastly more ambitious and painstakingly drafted bill than its California counterpart, AB 2833.

A key difference is that Biss’ bill opens new terrain by requiring disclosure of some of the most troubling terms of private equity limited partnership agreements, specifically, the indemnification provisions, the clawback language and management fee waivers.

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HB6292 also lifts the veil on management fee waivers. […] HB6292 requires both that the management fee waiver provisions in limited partnership agreements (including all definitions necessary to understand how the provision operates) be among other things, published material on its website, and “the amount of all management fee waivers made” be disclosed annually.

The bill also provides for disclosure of the signature block of the executed limited partnership agreement.

On the fee transparency front, while the Illinois bill focuses on issues similar to Chiang’s legislation, the approach is dramatically different. HB6292 has an exacting set of definitions. I spoke to Senator Biss about his approach and whether he had conferred with Chiang’s office. Biss said that he’d not known about the shortcomings with private equity disclosure until Chiang announced his intention to sponsor legislation last fall:

I thought I should learn more about it. I spoke to as many people as I could. The more I learned, the more troubling I found it. I didn’t think it was sustainable in the long run. I thought there was an opportunity and I wanted to play a role in this change.