A recent case in a North Dakota district court is a reminder to private equity funds and managers that, under certain conditions, they may be held responsible for actions of a fund’s portfolio companies. Courts allow...more
9/17/2019
/ Alter Ego ,
Corporate Veil ,
Fund Managers ,
Majority Shareholders ,
Piercing the Corporate Veil ,
Portfolio Companies ,
Private Equity ,
Private Equity Firms ,
Private Equity Funds ,
Shareholders ,
Venture Capital
Recently, a group of Congress members introduced into Congress Senate Bill 2155 named the Stop Wall Street Looting Act of 2019. Although unlikely to be enacted into law as drafted, this proposed legislation would directly and...more
9/4/2019
/ Employee Retirement Income Security Act (ERISA) ,
Financial Institutions ,
Hedge Funds ,
Investment Advisers Act of 1940 ,
Investment Company Act of 1940 ,
Legislative Agendas ,
Leveraged Buyout ,
Portfolio Companies ,
Private Equity Funds ,
Private Investment Funds ,
Proposed Legislation ,
Public Disclosure ,
Securities and Exchange Commission (SEC)
Today, we are launching a proprietary database tracking all SEC enforcement actions involving private equity advisers. The database contains key information from the actions, including summaries of key issues, settlement...more
7/23/2019
/ Broker-Dealer ,
Compliance ,
Conflicts of Interest ,
Disclosure Requirements ,
Disgorgement ,
Enforcement Actions ,
Investment Adviser ,
Investment Funds ,
Popular ,
Private Equity ,
Securities and Exchange Commission (SEC)
On July 3, 2019, SEC Chairman Jay Clayton issued a “Statement Regarding Offers of Settlement” (the “Statement”), announcing important changes to how the SEC will consider future requests for waivers from disqualifications in...more
7/9/2019
/ Bad Actors ,
Disqualification ,
Enforcement Actions ,
Registration ,
Regulation D ,
Safe Harbors ,
Section 5 ,
Securities Act of 1933 ,
Securities and Exchange Commission (SEC) ,
Settlement ,
Settlement Negotiations
A recent action where the SEC focused on the presumably conservative undervaluation of assets suggests that it is more than willing to use valuation as a hook to deter “smoothing” of returns. As we previously noted, while the...more
The DC Circuit recently released an opinion addressing the SEC’s administrative findings against registered investment adviser The Robare Group (TRG) for failure to disclose alleged conflicts of interest. Although the court...more
Last week the SEC announced a settlement of fraud claims against the founder of Jumio, Inc, a private mobile payments company, for misstating the company’s financial results and using those financials to sell his company...more
An increasingly sophisticated and active OCIE division, innovative market disruptors, a maturing credit cycle, and a philosophical change in how the private fund industry views and utilizes litigation are likely to lead to...more
2/21/2019
/ Cryptocurrency ,
Cybersecurity ,
Enforcement Actions ,
Fund Managers ,
Initial Coin Offering (ICOs) ,
Investment Adviser ,
Litigation Funding ,
OCIE ,
Regulatory Oversight ,
Securities and Exchange Commission (SEC) ,
Securities Exchange Act ,
Token Sales
While the SEC consistently announces that valuation is a “key area of focus,” it is uncommon for regulators to “second guess” valuation determinations in the absence of other potential violations. However, recent actions...more
On Friday, the WSJ published an article detailing how companies are monetizing smartphone location data by selling it to hedge fund clients. The data vendor featured in the WSJ article obtains geolocation data from about...more
11/7/2018
/ Anti-Fraud Provisions ,
Breach of Contract ,
Computer Fraud and Abuse Act (CFAA) ,
Cybersecurity ,
Data Collection ,
Data Protection ,
Electronic Communications ,
Fund Managers ,
Material Nonpublic Information ,
Personally Identifiable Information ,
Popular ,
Smartphones
Former SDNY U.S. Attorney Preet Bharara and SEC Commissioner Jackson recently announced, via NY Times op-ed, the creation of the Bharara Task Force on Insider Trading. Based on the premise that U.S. insider trading laws are...more
Fund managers take note – after over a year of warning, this month the SEC announced a pair of settlement orders with respect to registration requirements for a fund and broker dealer operating in the crypto and digital...more
The SEC announced a pair of settled orders on Tuesday extending additional provisions of the securities laws over ICOs and other digital assets – the agency’s first ever enforcement actions of their kind. As the SEC has been...more
9/17/2018
/ Broker-Dealer ,
Cryptocurrency ,
Digital Assets ,
Enforcement Actions ,
Initial Coin Offering (ICOs) ,
Investment Advisers Act of 1940 ,
Investment Company Act of 1940 ,
Investment Contract ,
Investors ,
Negligent Misrepresentation ,
Securities and Exchange Commission (SEC) ,
Securities Exchange Act ,
Token Sales
The theft of millions of bitcoins and related failure of cryptocurrency exchange Mt. Gox—recently written about in the Wall Street Journal—provides a perfect example of how cryptocurrency-related issues can blossom into one...more
On June 4, we posted a summary of SEC Enforcement Co-Director Steven Peikin observations during his recent keynote address at the New York City Bar Association’s 7th Annual White Collar Crime Institute. Co-Director Peikin...more
During his recent keynote address at the New York City Bar Association’s 7th Annual White Collar Crime Institute, SEC Enforcement Co-Director Steven Peikin imparted a few suggested “do’s and don’ts” for effective...more
Potential disputes involving unicorns have been a hot topic for the last several years. We predicted that would continue this year in in our webinar and related blog post: The Top Ten Regulatory and Litigation Risks for...more
5/4/2018
/ Credit Karma ,
Disclosure Requirements ,
Enforcement Actions ,
Financial Services Industry ,
Privately Held Corporations ,
Regulatory Standards ,
Rule 701 ,
Securities Act of 1933 ,
Securities and Exchange Commission (SEC) ,
Settlement Agreements ,
Stock Options ,
Unicorns
Last week, former CFTC Chairman Gary Gensler explained in remarks at M.I.T. that he believes the second and third most widely used virtual currencies—Ether and Ripple—may have been issued and traded in violation of securities...more
5/1/2018
/ CFTC ,
Cryptocurrency ,
Enforcement Actions ,
Fund Managers ,
Initial Coin Offering (ICOs) ,
Investment Adviser ,
OCIE ,
Regulatory Oversight ,
Securities and Exchange Commission (SEC) ,
Securities Exchange Act ,
Token Sales ,
Unregistered Securities
On April 12, 2018, the SEC's Office of Compliance Inspections and Examinations ("OCIE") issued a risk alert listing the most common compliance issues concerning fees and expenses charged by SEC-registered investment advisers....more
4/19/2018
/ Advisors Act ,
Billing ,
Disclosure Requirements ,
Fee Agreements ,
Fees ,
Form ADV ,
Investment Adviser ,
Marketing ,
OCIE ,
Policies and Procedures ,
Rebates ,
Risk Alert ,
Securities and Exchange Commission (SEC)
Last week the staff of the Office of Compliance Inspections and Examinations (OCIE) of the SEC announced its 2018 examination priorities. The 2018 examination priorities include five thematic areas: (i) compliance and risks...more
With the public equity markets at an all-time high and private equity fund raising setting new records, it might seem counter-intuitive to forecast litigation and regulatory risks. The opposite is true. Disputes typically...more
2/13/2018
/ Broker-Dealer ,
Commodity Exchange Act (CEA) ,
Cryptocurrency ,
CTFC ,
Cybersecurity ,
Enforcement Actions ,
Initial Coin Offering (ICOs) ,
Initial Public Offering (IPO) ,
Investment Adviser ,
Investment Advisers Act of 1940 ,
Litigation Fees & Costs ,
Popular ,
Private Equity Funds ,
Securities and Exchange Commission (SEC) ,
Unicorns
In his recent remarks at the Securities Regulation Institute, SEC Chairman Jay Clayton had some stern words for market professionals, especially lawyers, involved in initial coin offerings (ICOs). He expressed concern that...more
1/23/2018
/ Blockchain ,
Cryptocurrency ,
Digital Currency ,
Distributed Ledger Technology (DLT) ,
Financial Institutions ,
Financial Markets ,
Howey ,
Initial Coin Offering (ICOs) ,
Securities and Exchange Commission (SEC) ,
Token Sales ,
Unregistered Securities ,
Virtual Currency
If a team from the SEC arrives at your office and says, “We are conducting an on-site examination and would like to talk to the CCO right now,” are you prepared? A handful of registered investment advisers have faced surprise...more
Last night, the SEC announced its enforcement results for the Fiscal Year 2017, accompanied by a report from the Co-Directors of its Division of Enforcement. While the total number of actions was down slightly from 2016, the...more
On October 4, 2017, U.S. Representative Sean P. Duffy [R-WI-7] introduced U.S. House of Representatives Bill H.R.3948 entitled the “Protection of Source Code Act.”
If enacted, the Bill would amend the Securities Act, the...more