Fundraising

EVCA draws up placement agent code

Prompted by the ongoing pay-to-play investigation in the US, the European trade body has created a code of conduct to prevent unethical conduct in the European placement industry. The code has the backing of the LP body, ILPA.

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As the pension fund scandal rumbles on in New York, the European Private Equity and Venture Capital Association (EVCA) has launched a draft code of conduct for private equity and private equity real estate placement agents.

The code, which is due to be fully adopted later this year, gives guidelines for placement agents which, among other things, eliminates the possibility of pay-to-play – whereby finders or introducers demand sham “placement” fees in order to secure commitments from LPs.  The code also requires that agents disclose political or quasi-political donations made by placement firms.  

“What has happened in New York gave the placement industry an opportunity to examine and address itself,” said one European placement agent, “I’m not sure whether the industry in Europe has been dogged by unscrupulous behaviour, but it is important that we make an open statement of standards.”

The EVCA code has the backing of the Institutional Limited Partners Association (ILPA), a body that represents 220 member organisations with around $1 trillion in private equity under management. Joncarlo Mark, chairman of ILPA, described the code as “a positive step towards improving transparency in the industry”.

The task force assembled by EVCA to devise the code was chaired by placement firm MVision’s Mounir Guen and comprised eight professionals from the industry. The code’s development involved extensive consultation with US gatekeepers, US public pension funds and a wide range of EVCA members from the LP and GP communities, according to EVCA’s statement.

The code’s creation comes as New York Attorney General Andrew Cuomo is conducting a wide-ranging investigation into a pay-to-play scandal that originated out of the $109 billion New York State Common Retirement Fund.

A number of firms, including The Carlyle Group, Riverside and Pacific Corporate Group, have now signed up to a code of conduct created by Cuomo that bans investment firms from “hiring, utilising or compensating” placement agents, lobbyists or other third-party intermediaries to communicate or interact with public pension funds to obtain investments. The three aforementioned firms have also paid a combined total of $52 million in settlement fees.