The Delaware Revised Uniform Limited Partnership Act (“DRULPA”), under which many U.S. hedge funds are organized, entitles limited partners to access partnership information and records for purposes reasonably related to their interest as a limited partner, but DRULPA also provides the general partner with considerable flexibility to restrict the rights of a limited partner to obtain such information. According to a recent holding of the Delaware Supreme Court, however, the specific restrictions on a limited partner’s ability to demand and receive a list of all other limited partners must be explicitly set forth in the partnership agreement. Disclosures contained in offering documents or in privacy notices delivered to investors are not sufficient to establish standards to deny such a request.
In Parkcentral Global, L.P. v. Brown Investment Management, L.P., the court held that upon request by a limited partner, a hedge fund must produce a list of all partners’ names and addresses unless the fund’s limited partnership agreement explicitly states otherwise. Despite the fact that the fund’s privacy notices informed limited partners that their access to information relating to the names and addresses of other limited partners would be restricted due to confidentiality concerns, the court held that this was ineffective to eliminate any rights to access the contact information of other limited partners. The court further held that federal privacy regulations adopted under the Gramm-Leach-Bliley Act do not affect the right of limited partners to demand this information because disclosure is authorized under state law and limited partners are not considered unaffiliated third parties to which the federal privacy regulations apply.
The implications of this ruling for hedge funds organized in Delaware are significant. In light of this ruling, confidentiality provisions contained in PPMs, investor privacy notices and reliance on federal privacy regulations may be insufficient to prevent disclosure. The court stated that “if the [fund] wished to bar access to the names and addresses of partners, it could have done so explicitly in the Partnership Agreement.” Accordingly, hedge funds organized in Delaware wishing to avoid having to disclose the names and addresses of partners should carefully draft their limited partnership agreements to include explicit restrictions on a limited partner’s ability to access such information.
For more information on privacy and disclosure obligations or the potential impact of the recent holding of the Delaware Supreme Court, please contact us at (619) 278-0020.