The SEC’s pay-to-play rule has given advisers reason to worry about potential foot faults since its adoption. As we have noted in prior posts, the rule is filled with landmines and is therefore difficult to navigate. As was...more
We recently posted about the risks associated with veil-piercing claims and the ways in which fund managers can protect themselves from exposure to these claims. Our first post on veil-piercing focused on Delaware standards,...more
10/2/2017
/ Alter Ego ,
Choice-of-Law ,
Corporate Veil ,
Fund Managers ,
Internal Affairs Doctrine ,
Investors ,
Personal Liability ,
Piercing the Corporate Veil ,
Portfolio Companies ,
Shareholders ,
State of Incorporation
A veil piercing claim can be a worst-case scenario for a private fund manager dealing with a struggling portfolio company investment – the company fails, and ensuing legal claims are brought not only against the portfolio...more
9/21/2017
/ Alter Ego ,
Choice-of-Law ,
Corporate Fraud ,
Corporate Veil ,
Fund Managers ,
Internal Affairs Doctrine ,
Investors ,
Limited Liability Company (LLC) ,
Personal Liability ,
Piercing the Corporate Veil ,
Portfolio Companies ,
Private Funds ,
Risk Management ,
Risk Mitigation ,
Shareholder Litigation ,
WARN Act
The recent IPOs of Snap, Inc. and Blue Apron indicate that while the IPO pipeline continues to flow, there may be a cautionary tale for “unicorns” – venture-backed companies with estimated valuations in excess of $1 billion....more
No blockchain phenomenon has garnered more attention lately than Initial Coin Offerings ("ICOs"), which have exploded in value and raised more than $1.2 billion thus far this year....more
On July 12, 2017, newly appointed SEC Chairman Jay Clayton delivered a speech at the non-partisan Economic Club of New York wherein he set forth several high-level guiding principles for the agency. In general, these remarks...more
For private fund managers, the valuation of privately-held securities has been subject to heightened regulatory scrutiny. As the IPO on-ramp for private “unicorn” investments has lengthened, fund managers may hold illiquid...more
6/21/2017
/ Fund Managers ,
Initial Public Offering (IPO) ,
IRS ,
Portfolio Managers ,
Private Equity ,
Private Funds ,
Privately Held Corporations ,
Section 409A ,
Securities and Exchange Commission (SEC) ,
Unicorns ,
Valuation
Terrorist attacks, most recently in London and Manchester, England, have raised the pressure on law enforcement and lawmakers in countries like the U.K. and the U.S., to proactively intercept and interrupt terrorist...more
6/15/2017
/ Consumer Privacy Rights ,
ECPA ,
Electronic Communications ,
Electronically Stored Information ,
International Data Transfers ,
Law Enforcement ,
Legislative Agendas ,
Microsoft ,
National Security ,
Privacy Concerns ,
Stored Communications Act ,
Terrorist Acts ,
Trump Administration
The SEC has continued to pursue a number of insider trading cases this year, both large-scale and small. Some of those matters involved trades that yielded relatively small amounts of profits: $40,000-$60,000. Why does the...more
According to recent news reports, the DOJ and the SEC are investigating the possible improper use of third-party broker quotes by hedge fund managers to value illiquid debt securities in their portfolios. Prosecutors are...more
6/1/2017
/ Bonds ,
Brokers ,
Criminal Investigations ,
Debt Securities ,
Department of Justice (DOJ) ,
Fraud ,
Fund Managers ,
GAAP ,
Hedge Funds ,
Misleading Statements ,
Municipal Bonds ,
Securities and Exchange Commission (SEC) ,
Valuation
At the recent SEC Speaks program, sponsored by PLI, senior SEC staff members provided valuable insight into the SEC’s 2017 priorities for private funds. While the tenor of this year’s discussion seemed to focus more on...more
3/13/2017
/ Asset Management ,
Auditors ,
Broker-Dealer ,
Cybersecurity ,
Enforcement Guidance ,
Fee Disclosure ,
Insider Trading ,
Investment Adviser ,
OCIE ,
Private Funds ,
Public Pension ,
Retail Investors ,
SEC Examination Priorities ,
Securities and Exchange Commission (SEC) ,
Valuation
Private investment funds and advisers are likely to face new regulatory challenges and increased litigation risks in 2017, not only because of a change in the administration, but also because many advisers have not corrected...more
2/10/2017
/ Acquisition Agreements ,
Advertising ,
Business Development ,
Business Litigation ,
Capital Raising ,
Conflicts of Interest ,
Dodd-Frank ,
Financial Institutions ,
Financial Markets ,
Hedge Funds ,
Industry Examinations ,
Initial Public Offering (IPO) ,
Internal Controls ,
Investment ,
Marketing ,
Merger Agreements ,
OCIE ,
Pay-To-Play ,
Portfolio Companies ,
Private Equity ,
Private Funds ,
Public Offerings ,
Regulatory Oversight ,
Restructuring ,
Securities ,
Securities and Exchange Commission (SEC) ,
Snapchat ,
Unicorns ,
Valuation ,
Venture Capital ,
Whistleblowers
On November 18, 2016, outgoing SEC Chair Mary Jo White delivered a speech at New York University School of Law entitled “A New Model for SEC Enforcement: Producing Bold and Unrelenting Results.” Chair White’s remarks covered...more
11/29/2016
/ Dodd-Frank ,
Enforcement Actions ,
Financial Institutions ,
Private Funds ,
Proposed Legislation ,
Repeal ,
Securities and Exchange Commission (SEC) ,
Securities Violations ,
Senior Management Regime (SMR) ,
Trump Administration ,
Whistleblower Awards ,
Whistleblowers
In the wake of the election of Donald Trump as the 45th President of the United States, Mary Jo White has announced her intent to step down from her role as Chair of the Securities and Exchange Commission. Chair White, the...more
11/16/2016
/ Administrative Appointments ,
Administrative Resignation ,
Dodd-Frank ,
Enforcement Actions ,
Financial Institutions ,
Financial Markets ,
Presidential Elections ,
Securities ,
Securities and Exchange Commission (SEC) ,
Securities Exchange Act ,
Securities Violations ,
Trump Administration
On October 24, 2016, OCIE published a risk alert noting that the SEC exam staff intends to examine registrants' compliance with the Dodd-Frank Act's whistleblower provisions. The alert noted recent enforcement actions...more
11/1/2016
/ Dodd-Frank ,
Enforcement Actions ,
Ethics ,
Financial Institutions ,
OCIE ,
Pre-Employment Agreements ,
Registered Investment Advisors ,
Rule 21F ,
SEC Examination Priorities ,
Securities and Exchange Commission (SEC) ,
Securities Violations ,
Severance Agreements ,
Whistleblower Protection Policies ,
Whistleblowers
On October 17, 2016, Marc Wyatt, the Director of the SEC’s Office of Compliance, Inspection and Examinations, gave a keynote address to the National Society of Compliance Professionals titled: Inside the National Exam Program...more
On Friday, the SEC filed a complaint against James C. Cope, a former member of the Executive Committee of Pinnacle Financial Partners’ (“PFP”) board of directors, alleging that he engaged in insider trading. The same day,...more
10/26/2016
/ Acquisitions ,
Board of Directors ,
Civil Monetary Penalty ,
Complex Corporate Transactions ,
Confidential Information ,
Corporate Officers ,
Criminal Prosecution ,
Directors ,
Disgorgement ,
Enforcement Actions ,
Fiduciary Duty ,
Insider Trading ,
Mergers ,
Securities and Exchange Commission (SEC) ,
Securities Fraud
The Securities and Exchange Commission today announced its enforcement results for fiscal year 2016, reaching new highs in the number of actions filed and money ordered forfeited through disgorgement and penalties. The SEC...more
10/12/2016
/ Administrative Proceedings ,
Disgorgement ,
Enforcement Actions ,
Financial Institutions ,
Financial Markets ,
Foreign Corrupt Practices Act (FCPA) ,
Investment Adviser ,
Penalties ,
Private Equity ,
Securities and Exchange Commission (SEC) ,
Securities Violations ,
Whistleblower Awards ,
Whistleblowers ,
White Collar Crimes
On September 9, 2016, the SEC filed a complaint against RPM International Inc. (“RPM”) and the company’s General Counsel/CCO. The SEC claims the company filed false and misleading SEC filings that failed to disclose any loss...more
On August 25, 2016, the U.S. Securities and Exchange Commission (SEC) adopted numerous substantive and technical amendments to Form ADV, Part 1A, which previously had been proposed in a release dated May 20, 2015. Several of...more
Valuation is typically near the top of the list when the SEC’s enforcement division and exam staff disclose their priority topics for private funds. We expect that trend to continue and, if anything, the focus on valuation...more
A recent SEC settlement of whistleblower charges should serve as a useful reminder for private fund sponsors to conduct a comprehensive review of their policies and procedures.
On August 10, 2016, the SEC announced that...more
8/15/2016
/ Code of Conduct ,
Defend Trade Secrets Act (DTSA) ,
Dodd-Frank ,
Employee Handbooks ,
Employment Contract ,
Immunity ,
OSHA ,
Policies and Procedures ,
Private Funds ,
Securities and Exchange Commission (SEC) ,
Severance Agreements ,
Whistleblower Awards ,
Whistleblowers
A handful of recent SEC defeats in administrative proceedings have caused us to question the conventional narrative that the SEC has a distinct “home field advantage” before its own administrative law judges. According to...more
On July 13, 2016, the SEC announced that it will adopt certain amendments to its rules of practice governing administrative proceedings. Faced with criticism from practitioners and the media regarding a perceived “home field...more
As we have previously observed, private fund advisers face a difficult challenge when SEC guidance (in the form of a speech or a public enforcement order) indicates that certain long-standing practices may be contrary to the...more
6/28/2016
/ Anti-Retaliation Provisions ,
Dodd-Frank ,
Fund Managers ,
Internal Investigations ,
Internal Reporting ,
Investment Adviser ,
Private Funds ,
Securities and Exchange Commission (SEC) ,
Securities Violations ,
Whistleblower Awards ,
Whistleblowers