As President Biden continues to assemble his economic team, reports have emerged that President Biden will nominate Gary Gensler as the next Chair of the SEC. The nomination of Mr. Gensler would clearly signal a more...more
One driver for the first widely adopted cryptocurrency Bitcoin was to create a store of value that existed outside of government control. It is therefore no surprise that attempts to regulate the rapidly developing crypto...more
1/8/2021
/ Bitcoin ,
CFTC ,
Cryptoassets ,
Cryptocurrency ,
Enforcement Actions ,
Financial Conduct Authority (FCA) ,
FinCEN ,
HMRC ,
Initial Coin Offering (ICOs) ,
International Tax Issues ,
Securities and Exchange Commission (SEC) ,
UK
On Monday the SEC announced its enforcement results for FY 2020, accompanied by a report from the Director of its Division of Enforcement. This report confirms what we have seen over the past year for private fund managers:...more
On October 7th, 2020, the Securities and Exchange Commission (SEC) announced the rescheduled date of its 2020 national compliance outreach seminar for investment companies and investment advisers. This program is intended to...more
Asset managers commonly engage regulatory compliance consultants to aid them in addressing regulatory requirements and implementing compliance programs. The work of those compliance professionals can be drawn into SEC...more
10/15/2020
/ Administrative Law Judge (ALJ) ,
Asset Management ,
Compliance ,
Consultants ,
Form ADV ,
Good Faith ,
Investment Advisers Act of 1940 ,
Motions in Limine ,
Scienter ,
Securities and Exchange Commission (SEC) ,
Securities Regulation ,
Securities Violations
We have seen the SEC increase its focus on valuation of privately-held portfolio companies recently. The SEC’s increased focus is in line with our prediction made in the Top Ten Regulatory and Litigation Risks for Private...more
9/1/2020
/ Anti-Fraud Provisions ,
Compliance ,
Enforcement Actions ,
GAAP ,
Internal Controls ,
Investment Adviser ,
Investment Advisers Act of 1940 ,
Portfolio Companies ,
Private Equity Funds ,
Privately Held Corporations ,
Securities and Exchange Commission (SEC) ,
Transparency
As investors drive demand for investment products focused on environmental, social and governance (ESG) factors, fund managers have increasingly offered ESG-focused or “sustainable investing” funds. However, a recent speech...more
8/25/2020
/ Asset Management ,
Compliance ,
Corporate Governance ,
Disclosure Requirements ,
Environmental Policies ,
Environmental Social & Governance (ESG) ,
Fund Managers ,
Internal Controls ,
Investment Advisers Act of 1940 ,
OCIE ,
Policies and Procedures ,
Securities and Exchange Commission (SEC) ,
Taxonomy
As the economic impact of COVID-19 continues to reverberate across all global industries, there is an increased risk of claims being asserted against private fund managers, their funds and portfolio companies, as well as key...more
8/24/2020
/ Contract Negotiations ,
Coronavirus/COVID-19 ,
D&O Insurance ,
E&O Insurance ,
Fund Managers ,
Infectious Diseases ,
Insurance Brokers ,
Insurance Claims ,
Insurance Industry ,
Policy Exclusions ,
Portfolio Companies
The SEC issued an order imposing sanctions against private equity adviser Rialto Capital Management, LLC (“Rialto”) for violations of the Advisors Act relating to expense allocation. The settlement addressed Rialto’s...more
8/14/2020
/ Allocation of Funds ,
Enforcement Actions ,
Investment Adviser ,
Investment Advisers Act of 1940 ,
LPAC ,
Policies and Procedures ,
Private Equity ,
Private Equity Funds ,
Registered Investment Advisors ,
Sanctions ,
Securities and Exchange Commission (SEC) ,
Third-Party ,
Transparency
In August 2020, the SEC issued two orders against VALIC Financial Advisors Inc. (VFA) related to VFA’s management of 403(b) and 457(b) plans. These matters arise out of two of the SEC’s enforcement initiatives, the Teachers...more
8/12/2020
/ 403(b) Plans ,
457(b) Plans ,
Asset Management ,
Breach of Duty ,
Broker-Dealer ,
Compliance ,
Conflicts of Interest ,
Enforcement Actions ,
Investment Adviser ,
Investment Advisers Act of 1940 ,
Investment Firms ,
Investment Funds ,
Retail Investors ,
Retirement Plan ,
Securities and Exchange Commission (SEC)
With more people working remotely than ever before in light of COVID-19, firms in the private equity and hedge fund space should review their Regulation S-P privacy and information-safeguarding policies to ensure they are...more
6/30/2020
/ Broker-Dealer ,
Consumer Financial Protection Bureau (CFPB) ,
Coronavirus/COVID-19 ,
Cybersecurity ,
Data Privacy ,
Data Protection ,
Data Security ,
OCIE ,
Personally Identifiable Information ,
Policies and Procedures ,
Regulation P ,
Regulation S-P ,
Risk Alert ,
Securities and Exchange Commission (SEC)
In a cautionary tale about the career-limiting risks of SEC sanctions, a private fund adviser and its owner were found to have misused over $1 million of fund assets, resulting in a bar from the investment industry as well as...more
The SEC has been active in the private equity space recently after being relatively quiet for some time. A recent enforcement action serves as a reminder for fund sponsors that regulators are continuing to look at fund...more
Though SEC scrutiny of performance results in fund marketing materials is nothing new, a recent settlement order suggests that the Commission continues to closely examine representations in marketing materials with respect to...more
Going into 2020, we expected scrutiny over valuation methods to be one of the top regulatory risks for private funds. With ongoing economic uncertainty applying pressure, the SEC will continue to focus on valuation issues...more
Last month the SEC brought an enforcement action illustrating how cross trades can trip up a manager of a private fund. The SEC’s settlement with investment manager Lone Star Value Management LLC was based on allegations...more
Last year, we highlighted the risks of filing a Section 220 books and records request post-litigation, citing a case where the Delaware Chancery Court found that such use was an improper attempt to “sue first, ask questions...more
On January 13, 2020, the United States Supreme Court denied certiorari to an appeal of a June 2019 order from the United States Court of Appeals for the D.C. Circuit that dismissed an action seeking to invalidate certain...more
2/27/2020
/ Broker-Dealer ,
Compelling Governmental Interest ,
Denial of Certiorari ,
Financial Industry Regulatory Authority (FINRA) ,
First Amendment ,
Investment Adviser ,
Investment Advisers Act of 1940 ,
MSRB ,
Pay-To-Play ,
Political Contributions ,
Quid Pro Quo ,
Regulatory Requirements ,
Rule G-37 ,
Securities and Exchange Commission (SEC) ,
Time-Barred Claims
The private fund industry is more in the public eye than ever before. Private capital and private markets have experienced massive growth over the last two decades, substantially outpacing the growth of public equity. We have...more
2/19/2020
/ Anti-Money Laundering ,
Capital Markets ,
CFTC ,
Cryptocurrency ,
Global Economy ,
Initial Public Offering (IPO) ,
Investment Banks ,
OCIE ,
Private Equity ,
Private Funds ,
SEC Examination Priorities ,
Securities and Exchange Commission (SEC) ,
Venture Capital
Last week, the SEC's Office of Compliance Inspections and Examinations released its 2020 Exam Priorities with a number of areas of interest to private fund managers. OCIE reported that it examined 15% of registered investment...more
1/15/2020
/ Anti-Money Laundering ,
Conflicts of Interest ,
Cybersecurity ,
Disclosure Requirements ,
Environmental Social & Governance (ESG) ,
Investment Adviser ,
OCIE ,
Personally Identifiable Information ,
SEC Examination Priorities ,
Securities and Exchange Commission (SEC) ,
Standard of Conduct
Since the Second Circuit’s 2014 decision in United States v. Newman triggered a debate about the personal benefit requirement, several bills have been introduced in Congress to define insider trading. The most recent effort...more
Under rule 206(4)-2 of the Advisers Act, otherwise known as the Custody Rule, it is a fraudulent practice for a registered investment adviser to have custody of client funds or securities, unless the adviser takes certain...more
12/12/2019
/ Auditor Independence ,
Compliance ,
Custody Rule ,
Enforcement Actions ,
Financial Statements ,
Form ADV ,
GAAP ,
Investment Adviser ,
Investment Advisers Act of 1940 ,
PCAOB ,
Regulation S-X ,
Securities and Exchange Commission (SEC) ,
Willful Violations
In a series of enforcement cases over the past few months, the SEC has continued to bring actions focused on undisclosed fees charged to clients. Many of these cases have charged firms with fraud and other violations based on...more
11/12/2019
/ Affiliates ,
Anti-Fraud Provisions ,
Conflicts of Interest ,
Disgorgement ,
Enforcement Actions ,
Excessive Fees ,
Fee Disclosure ,
Fee-Sharing ,
Investment Adviser ,
Investment Advisers Act of 1940 ,
Securities and Exchange Commission (SEC)
Yesterday the SEC announced its enforcement results for FY 2019, accompanied by a report from the Co-Directors of its Division of Enforcement. While the total number of actions increased slightly from 2018, the percentage of...more
A settlement last week involving a private equity fund sponsor is a reminder that compliance with fee calculation provisions and valuation policies and procedures are crucially important for fund managers. Even when an error...more
10/3/2019
/ Capital Contributions ,
Cease and Desist Orders ,
Enforcement Actions ,
Fund Sponsors ,
Investment Advisers Act of 1940 ,
Management Fees ,
Policies and Procedures ,
Private Equity ,
Sanctions ,
Securities and Exchange Commission (SEC) ,
Valuation