Legacy Securities Public-Private Investment Program (PPIP) 

Summary of Conflicts of Interest Rules and Ethical Guidelines 

The United States Department of the Treasury (“Treasury”) has designed a robust set of conflict 

of interest rules and ethical guidelines for the Legacy Securities Public-Private Investment 

Program (“PPIP”). Through these measures, Treasury protects the taxpayer funds that will be 

used to attract private capital and investment expertise to markets that are impeding an economic 

recovery. 

In developing these requirements, Treasury researched best practices and received extensive 

outside feedback, including from the staff of the Special Inspector General for the Troubled 

Asset Relief Program (“SIGTARP”) and the compliance staff of the Federal Reserve Bank of 

New York (“FRBNY”). Their recommendations were adopted wherever, in Treasury’s 

judgment, it was feasible to do so. 

Summary of Treasury’s Process to Investigate and Mitigate Conflicts of Interest

Treasury engaged in a rigorous process to investigate and mitigate conflicts of interests that 

could affect a Public-Private Investment Fund (“PPIF”). This process was conducted in 

connection with the evaluation of PPIP fund manager applicants and included the following 

primary steps: 

• Treasury required PPIP fund manager applicants to identify all actual or potential conflicts of 

interest and propose how they would prevent or mitigate those conflicts. 

• Treasury assessed each potential PPIP fund manager’s responses and identified any 

deficiencies with respect to governance and conflicts mitigation controls. 

• For those applicants selected as finalists, Treasury conducted due diligence to obtain 

additional information regarding governance and conflicts of interest issues, including 

information with respect to the proposed PPIF: (i) internal audit methodology, accounting 

policies and procedures and internal controls; (ii) mechanisms to identify, track, eliminate, 

mitigate, and monitor conflicts of interest; (iii) policies regarding affiliates, valuation, trade 

allocations and handling of material non-public / sensitive information; and (iv) Chief 

Compliance Officer’s responsibilities, authorities and independence. 

• Treasury benchmarked these responses across several key compliance and conflicts of 

interest metrics and then prepared follow-up due diligence questions for each finalist, as 

necessary. 

• Finalists made in-person presentations to Treasury that provided additional opportunities for 

Treasury to seek more information. A SIGTARP representative was present at most of these 

meetings. 

This process allowed Treasury to develop conflicts of interest standards that will ensure that the 

PPIP can protect taxpayers’ interests while simultaneously attracting private capital and 

investment expertise to markets that have been substantially frozen for many months. 
Summary of Conflicts of Interest Rules and Ethical Guidelines

All PPIP fund managers will be required to adopt the following provisions which include, but are 

not limited to, the items set forth below: 

 

• Conflicts regarding PPIP fund manager affiliates holding Eligible Assets: PPIFs may not 

buy from or sell Eligible Assets to: (i) its affiliates (thus, a PPIF cannot sell assets from nonPPIF funds into the PPIF); (ii) any other PPIF managed by a different PPIP fund manager; or 

(iii) any investor that has invested 10% or more of the aggregate private capital raised by the 

PPIF. In addition, any transaction with a related party must be at arm’s length, commercially 

reasonable, and on terms no less favorable to the PPIF than in transactions with unrelated 

parties. 

• Alignment of PPIP fund manager and investor interests: Treasury will require each PPIP 

fund manager to invest a minimum of $20 million of firm capital in the PPIF they manage. 

Additionally, each PPIP fund manager must allow co-investment by PPIP fund manager staff 

and employees in the PPIF it manages to better align incentives between the PPIP fund 

manager and the investors in the PPIF. PPIP fund managers must demonstrate that their 

compensation systems align the economic interests of those that run the fund with interests of 

investors in the PPIF. 

• Key policies and procedures (allocation and valuation / pricing policy): PPIP fund managers 

must adopt policies and procedure that comply with the Investment Advisers Act of 1940 in 

all material respects. The pre-qualified fund managers have been chosen from a large pool of 

applicants and have impressive track records and reputations. Each pre-qualified fund 

manager maintains strict internal policies regarding ethics and compliance. In addition, each 

pre-qualified fund manager is also a registered investment advisor and maintains independent 

auditors and corporate governance processes. 

• Independent compliance department and oversight: PPIP fund managers will be required to 

maintain an independent compliance department that reports all positions in Eligible Assets 

(PPIF and non-PPIF funds) to Treasury on an on-going basis. This allows Treasury to 

monitor and audit all funds in the investment manager’s family of funds that trade in Eligible 

Assets and allows Treasury to see the flow of Eligible Assets throughout the firm. Thus, 

Treasury will be able to evaluate if the PPIP fund manager is purposely disadvantaging the 

PPIF relative to other funds. In addition, Treasury and SIGTARP will have the right to 

conduct annual and ad hoc audits of compliance with all policies. 

• Personal conflicts of interest of PPIP fund manager employees: Treasury will require that all 

PPIFs maintain stringent policies related to of the handling of material non-public 

information, personal trading, outside business affiliations, and the giving and accepting of 

gifts and entertainment. In addition, all key individuals of the PPIP fund manager must 

comply with an approved code of ethics and associated personal trading policy.

• Conflicts with PPIP fund manager placement agents and broker-dealer relationships: PPIP 

fund managers may not have “pay-to-play” arrangements with placement agents, 

underwriters, and other service providers in which money or other forms of direct or indirect 
compensation are exchanged for services for the privilege to engage in such activities. In 

addition, PPIFs may not execute trades through any broker-dealer affiliated with the PPIF 

fund manager.