part 3 Flashcards
What is the nature of venture capital (VC) in the Anglo-Saxon environment?
VC is an ordinary business activity, not a financial activity as in Europe.
What are the different forms in which venture capital is run?
VC can be run by:
* Financial institutions
* Non-financial firms
* Individuals
* Government backed investors
What legislation created Small Business Investment Companies (SBICs) in the US?
Small Business Investment Act (1958)
What does the SEC’s ‘Presence Exam’ initiative pertain to?
It commenced in October 2012 regarding the involvement of the SEC in venture capital.
Define an accredited/sophisticated investor.
An accredited investor is either a professional investor or an individual with a net worth exceeding 1 million US$ and an annual income greater than 200k US$ in the last two years.
What does the acronym SA stand for in securities regulation?
Securities Act (1933)
What does the acronym SEA stand for?
Securities and Exchange Act (1934)
What is the purpose of the Sarbanes-Oxley Act (SOX) of 2002?
To reinforce information disclosure and responsibilities.
What is the JOBS Act, and when was it enacted?
Jumpstart Our Business Startups Act (2012) - streamlining regulation for public equity offers up to US$ 50 million and crowdfunding platforms.
What is SEC Regulation D and when was it established?
SEC Regulation D (1982) - provides exemptions for small sales of securities from registration.
What does the Investment Company Act (ICA) of 1940 regulate?
It regulates the organization of companies that invest and trade in securities.
What is net asset value (NAV)?
NAV is the market value of the capital invested in portfolio companies.
What is the significance of the Employee Retirement Income Security Act (ERISA) of 1974?
It introduced portfolio theory in the ‘prudent man rule’ interpretation.
What is the difference between closed-end and open-end funds?
Closed-end funds have a fixed number of shares, while open-end funds can issue new shares as investors buy in.
What is the most common legal form for organizing pooled capital in the UK?
Trust
Fill in the blank: The most relevant legal entities for VC activity in Europe are _______.
closed-end funds and trusts.
What type of investors are Alternative Investment Funds (AIF) reserved for?
Professional investors
What does the AIFMD stand for?
Alternative Investment Funds Management Directive (2013)
What role does the Technical (or Investors’) Committee play?
It monitors the managers’ activities, particularly regarding investment and exit decisions.
Which act introduced more favorable taxation for capital gains?
Revenue Act (1978)
What is the primary concern of the SEC regarding Initial Coin Offerings (ICOs)?
Risk of fraud and manipulation.
True or False: The closed-end fund is the more commonly used investment scheme to run VC activities in Europe.
True
What does ESMA stand for?
European Securities and Markets Authority
ESMA is responsible for enhancing investor protection and promoting stable and orderly financial markets in the EU.
What is the primary regulation for financial services in Italy?
Financial Services Act
This act regulates various aspects of financial services and is enforced by domestic authorities.
What role do advisory companies play in venture capital (VC) activity?
Support the AMC in seeking investment opportunities
Advisory companies help identify good investment opportunities, particularly in high-tech industries on a global scale.
What does LPA stand for?
Limited Partnership Agreement
LPA governs the relationship between limited partners (LPs) and general partners (GPs).
Who are LPs in the context of LPA?
Passive shareholders
LPs contribute capital but do not participate in day-to-day management.
Who are GPs in the context of LPA?
Active shareholders
GPs manage the partnership and make investment decisions.
What legal framework does the LPA represent?
Common law approach
The LPA is a contractual agreement that regulates the relationship between LPs and GPs.
What happens in case of litigation regarding the LPA?
Parts go to Court
The agreement is enforceable in court if disputes arise.
What is a notable difference between LPs and GPs in terms of legal separation?
No legal separation like in Europe
In the discussed context, LPs and GPs operate within the same legal entity without distinct legal separation.
What is the significance of having a Limited Partnership Agreement (LPA)?
Regulates claims and responsibilities of LPs and GPs
The LPA clarifies the roles and obligations of each party in the partnership.
True or False: The Financial Services Act is only applicable in Italy.
False
The Financial Services Act may have equivalents in other jurisdictions, but this specific act refers to Italy.
