Privacy and cybersecurity issues continue to garner significant attention in the U.S. and abroad. As private investment funds registered with the SEC and their portfolio companies see increased regulatory scrutiny relating to privacy and cybersecurity in the U.S., Proskauer’s Margaret Dale, Todd Ohlms, Jonathan Weiss, Kelly McMullon and Hena Vora write for Bloomberg Law as part of our ongoing litigation series about recent developments in the regulatory landscape.
With new types of digital assets and related business on the rise, federal authorities have been busy investigating. Recently, the SEC, FinCEN and the CFTC have imposed some notable settlements involving cryptocurrency trading platforms for allegedly operating without appropriate approvals from financial regulatory authorities. This may be the start of the next wave of government enforcement activities. Continue Reading
The SEC recently charged a former employee of a biopharmaceutical company with insider trading in advance of an acquisition but with a unique twist: Trading the securities of a company unrelated to the merger. The employee, Matthew Panuwat, did not trade his own company’s or the acquiring company’s securities, but instead purchased stock options for shares of a competitor not involved in the acquisition, in the belief (as alleged by the SEC) that the competitor’s stock price would also benefit from the news. The SEC did not allege that Panuwat had any particular information received from the company whose stock he had traded, but that he had engaged in what has been referred to as “shadow trading” of a comparable company by misappropriating information from his employer.
As a part of an ongoing litigation series in Bloomberg Law, Proskauer shifts focus to the rise of SPACs and associated risks. In this article, Mike Hackett, Timothy Mungovan, Todd Ohlms, Jonathan Weiss and David Heck discuss the issues and risks that are common to the SPAC process, as well as the specific inflection points where those risks might arise.
As part of an ongoing series of articles that focus on the top regulatory and litigation risks for private funds in 2021, William C. Komaroff, Seetha Ramachandran and Joseph Hartunian write for Bloomberg Law on the return to civil and criminal collaboration in white collar investigations under the Biden Administration.
As one of the first of an expected series of potential enforcement actions, the SEC has brought an enforcement action against a SPAC and its major participants, highlighting enhanced regulatory scrutiny of SPACs and underscoring the importance of following appropriate diligence and other practices in the de-SPAC process. Given the rapid growth in this sector over the past few years, the SEC’s Enforcement Division has a working group focused on the area, combined with staff guidance and remarks earlier this year on SPACs relating to the use of projections, accounting methodologies and celebrity involvement with SPACs. With this in mind, this client alert offers a few practice considerations for fund managers in the area.
As litigation claims against portfolio companies have increased, so have accompanying claims asserted directly against funds (and their sponsors). Plaintiffs’ reasoning for including funds as defendants is no mystery: funds often have greater financial resources than the defendant portfolio company, particularly where the portfolio company is in distress, and thus represent the proverbial “deep pockets.” This is especially true where a liquidity event involving the portfolio company either recently occurred or is on the horizon. Liquidity events, which range from major portfolio company transactions to liquidation or reorganization, often lead to substantial returns for funds. Continue Reading
We anticipate a more assertive regulatory enforcement program under the Biden administration, particularly focused on fund managers’ conflicts of interest, advisers’ codes of ethics, and related policies and procedures relating to material nonpublic information. These concerns may be heightened for fund managers participating in bankruptcy proceedings, where competing fiduciary obligations arise, particularly in the context of serving on creditors committees. Outlined below are three primary concerns. Continue Reading
Registered advisers should take note that on June 17th, the SEC adjusted the dollar amount thresholds for clients of registered advisers to be deemed to be “qualified clients” under rule 205-3 of the Investment Advisers Act of 1940, which permits registered investment advisers to charge performance-based fees to such clients. Upon the effective date of August 16, 2021, the assets-under-management and net worth thresholds under rule 205-3 will now be $1,100,000 and $2,200,000, respectively.
Proskauer’s Asset Management Litigation partner Dorothy Murray recently authored an article on litigation risks of SPACs.
Dorothy details why the recent popularity of this latest incarnation of so-called “blank cheque” companies will inevitably lead to disputes, and the reasons are all connected to the very features that make SPACs so attractive in the first place. Like all investment vehicles, SPACs carry risks for the unwary but this is exacerbated by their particular combination of public and private capital, and unique structure, stakeholder roles and process. She identifies five key issues: conflicts, the regulatory context, the need for additional capital, ongoing governance and increasing complexity in de-SPACing.