Client Alert: Reminder to Send Annual Privacy Notices


Since 2001, the Privacy of Consumer Financial Information rule adopted by the Federal Trade Commission (FTC) under the Gramm-Leach-Bliley Act has required all financial institutions (including private equity funds) to send annual notices to their investors who are individuals[1] describing the fund's privacy policy, the categories of nonpublic personal information the fund intends to disclose, the categories of affiliates or third parties to which such disclosures will be made, and a method for the investor to "opt-out" of the disclosure of personal information to third parties (to the extent the fund discloses information to third parties).


Each fund must distribute the annual notice to individual investors every twelve months. Usually, the fund must mail a hard copy of the notice to each investor. However, the fund may meet the distribution requirement by emailing the notice to an investor or by posting it on a fund website[2] that the investor can access if the investor has specifically consented to receiving information electronically from the fund.


New for 2010: In 2010, the FTC developed a form of privacy policy that must be used after December 31, 2010 to comply with the “safe harbor” provisions of the regulations. This form, generally conformed for use by an investment fund, is available for review here. Through December 31, 2010, you may continue to use a privacy notice that complies with the prior safe harbor (like the ones we have provided previously). 


If you have any questions regarding complying with the Privacy of Consumer Financial Information rule or the new safe harbor requirements, please call Keith Kaplan at 215-569-4143 or Jon Katona at 215-569-4222.


[1]             In practice, most private equity funds establish one privacy policy that covers all investors (that is, individuals and institutions) and distribute it to institutional investors in connection with the required distribution to individual investors. Depending on your preference, we can provide a form of policy to you that applies to all investors or just the individual investors (who are required to be notified).


[2]             The policy or a link to the policy must be posted on a webpage that investors access frequently.