On May 20, President Obama signed into law the Public-Private Investment Program Improvement And Oversight Act of 2009, which is contained within the Helping Families Save Their Homes Act of 2009 (the Act). The Act imposes additional statutory restrictions on the operation of the planned Public-Private Investment Program (PPIP) that is intended to encourage private investors to purchase “legacy” assets that are clogging bank balance sheets. Many of the new requirements respond to concerns voiced by the Office of the Special Inspector General of the Troubled Asset Relief Program (SIGTARP), but may have the effect of limiting the interest of potential PPIP participants.
Section 402 of the Act requires each Public-Private Investment Fund (PPIF) formed pursuant to any federal government program to:
- give the SIGTARP access to all books and records of any PPIF;
- acknowledge, in writing, a fiduciary duty on the part of the PPIF’s manager to both the public and private investors in the PPIF;
- identify for the Secretary of the Treasury (Secretary), on a periodic basis, each investor that, individually or together with affiliates, directly or indirectly, holds equity interests equal to at least 10% of the equity interest of the PPIF;
- make a quarterly report to the Secretary that discloses the 10 largest positions of the PPIF (to be disclosed publicly by the Secretary at such time it determines will not harm the ongoing business operations of the PPIF);
- comply with strict investor screening procedures;
- retain all books, documents and records relating to the PPIF, including electronic messages;
- develop a robust ethics policy that includes methods to ensure compliance with such policy; and
- comply with strict conflict of interest rules developed in consultation with the SIGTARP to ensure securities are purchased by PPIFs in arms-length transactions, without violating fiduciary duties to public and private investors, and with full disclosure of “relevant facts and financial interests”.
The Act also amends certain provisions of the Emergency Economic Stabilization Act of 2008 (EESA) in order to provide the Comptroller General with increased authority to access, upon request, a wide range of information, records, reports or emails relating to any entity participating in a program established under the authority of EESA (which would include PPIP and the Term Asset-Backed Securities Loan Facility (TALF), since both programs involve the use of TARP funds), and to the officers, employees, agents and representatives of those entities.
Finally, the Act requires the Secretary to consult with the SIGTARP and issue regulations governing the interaction of the PPIP with the TALF, addressing concerns regarding “the potential for excessive leverage that could result from interactions between such programs.”
For a copy of the Act, click here.