The Capital Commitment

Proskauer on Private Equity Litigation

Reported Criminal Probes Regarding Bond Valuations Highlight the Importance of Valuation Procedures

SECAccording 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 reportedly focused on possible instances where fund managers allegedly solicited predetermined or improper quotes from brokers, and used those estimates to inflate their own valuations of thinly-traded mortgage bonds.

In addition, the co-head of the SEC’s Asset Management Unit recently highlighted that unit’s focus on valuation, particularly where registered advisers failed to follow their own internal procedures when valuing illiquid positions. The SEC’s focus is further demonstrated by a recent action against a fund manager for improperly valuing municipal bonds inconsistently with GAAP.

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Cyber Attack Protection Steps for Investment Firms

We are reaching out to our investment firm clients to advise them of an email “spear phishing” scam that has targeted investment firms recently, attempting to lure their personnel into inadvertently revealing their email account credentials to criminal fraudsters, and making wire transfers to the criminal’s account instead of the intended account.

There has been a significant uptick in this scam against investment firms. We recommend that our clients advise their personnel who are involved with wire transfers to:

  • Examine “reply to” email addresses carefully to verify that the email came from the exact email address of the person who purportedly sent it
  • Beware of emails that appear to be from someone the recipient knows, that link to a log-in page where the recipient is required to enter his or her username and password in order to access something
  • Beware of emails that change wire transfer instructions from what they had been in the past or anything abnormal about the wire transfer authorization process
  • Prior to initiating any wire transfer, confirm instructions by telephone with an authorized representative of the recipient

Firms are also advised to consider the legitimate emails that their personnel receive regularly that request passwords or authorize wire transfers, and to configure their email filters to block mimicked versions of those emails that are not from the email address that they should be from.

Proskauer Releases Regulation of Investment Advisers, the Definitive Guide by Regulatory Expert Robert Plaze

Regulation of Investment Advisers by the U.S. Securities and Exchange Commission, by Robert E. Plaze,

We are pleased to announce that Proskauer has released Regulation of Investment Advisers by the U.S. Securities and Exchange Commission, by Robert E. Plaze, who recently joined Proskauer as a partner.  Bob previously served as Deputy Director of the Division of Investment Management of the SEC.  This publication, which draws on Bob’s nearly 30 years of service with the SEC, is the definitive outline summarizing SEC regulatory issues for Investment Advisers.

Regulation of Investment Advisers is regularly updated and covers extensive ground in key areas for fund managers.  It synthesizes regulation of advisers by the SEC, identifies legal and regulatory precedents, and provides hyperlinks to the underlying authorities.  We hope that you will find it to be a helpful resource.

Please feel free to bookmark or download Regulation of Investment Advisers by the U.S. Securities and Exchange Commission.

SEC Announces 2017 Compliance Outreach Program Seminars for Investment Companies and Investment Advisers

SECOn Thursday, March 23rd, the Securities and Exchange Commission announced the opening of registration for its compliance outreach program seminars for investment companies and investment advisers.  The seminars will be offered in four U.S. cities and are intended to help Chief Compliance Officers (CCOs) and other senior personnel enhance compliance programs at investment companies and investment advisory firms. Continue Reading

SEC Speaks: 2017 Enforcement and Exam Trends for Private Funds

SECAt 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 retail investors, the staff discussed several topics that private fund advisers should keep in mind from both an enforcement and exam standpoint.


The SEC’s Asset Management Unit (AMU) Co-Chief Dabney O’Riordan outlined several areas that the AMU will focus on this year.  As a general matter, O’Riordan underscored that the structure of private funds can impair transparency for investors, which compounds risks in all of the areas that she discussed.  In particular, she noted the following areas of focus for private funds:

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The Top Ten Regulatory and Litigation Risks for Private Funds in 2017

Top-10-2017_v2Private 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 and aligned past practices with current regulatory guidance.  In this post, we have highlighted ten areas that should be on the top of every private fund adviser’s list for 2017 – and how to assess and manage the associated risks. Continue Reading

SEC Staff Announces 2017 OCIE Examination Priorities

SECOn January 12, 2017, the staff of the Office of Compliance Inspections and Examinations (OCIE) of the Securities and Exchange Commission (SEC) released its annual announcement on examination priorities in the coming calendar year. The 2017 examination priorities are organized around three thematic areas: (i) examining matters of importance to retail investors; (ii) focusing on risks specific to elderly and retiring investors; and (iii) assessing market-wide risks. Continue Reading