A growing number of European hedge fund managers are actively seeking injections of capital from U.S. investors subject to the Employee Retirement Income Security Act of 1974 (ERISA).  Hedge fund managers wishing to “cross-over” their funds into the ERISA regulatory sphere must, however, be cognizant of the increased and complex tangle of regulations and compliance obligations which have often deterred European managers from pursuing ERISA assets.  This second article in a three-part series examines particular issues U.K. and other European managers face stemming from prohibited transactions rules and reporting requirements under the ERISA regime and offers approaches to side letters for European managers raising capital from ERISA plans.  The first article analyzed the pertinent issues affecting European managers relating to liability standards and incentive fees.  The final article in the series will address concerns relating to indicia of ownership requirements, bond documentation and other issues.  See also “Happily Ever After? – Investment Funds that Live with ERISA, For Better and For Worse (Part Five of Five),” Hedge Fund Law Report, Vol. 7, No. 37 (Oct. 2, 2014); and “RCA PracticeEdge Session Highlights the Key Points of Intersection between ERISA and Hedge Fund Investments and Operations,” Hedge Fund Law Report, Vol. 7, No. 27 (Jul. 18, 2014).