Proskauer partners Jeff NeuburgerRobert LeonardJosh Newville and Jonathan Richman recently invited hedge fund executives to discuss the complex regulatory and compliance issues raised by the use of alternative data.   Jeff, Robert and Josh also contributed an article to the Hedge Fund Law Report on Best Practices for Private Fund Advisers to Manage the Risks of Big Data and Web Scraping.

Fund managers have been capitalizing on methods to refine and analyze big data to assist investment decisions.  What types of alternative data are being used to gain new insights?  Sources include: e-commerce receipts and credit-card transaction data; sensors from internet-connected machines or smart devices; and online data collected via “screen scraping” (or “web scraping” or “spidering”).

Yet alternative data does not come without risks.  For example, data collected as a result of web scraping may be considered material nonpublic information (MNPI).  If that data were collected in a manner considered deceptive, then trading on that information might implicate the anti-fraud provisions of the securities laws.  Circumventing security protocols or disguising a scraper’s identity on a site (where required), among other behaviors, could be viewed as misrepresentations or “deceptive devices” under Section 10(b) of the Securities Exchange Act.d

Hedge fund managers and other financial services firms using information in this new environment should therefore understand the legal risks and fashion appropriate policies and procedures (both internal and with respect to vendor diligence).  We have made the materials from Proskauer’s presentations available here, outlining the complex regulatory, compliance and contractual issues raised by the data aggregation, web scraping and other data science methods.  These topics include:

  • Types of Data Aggregators
  • Web Scraping and Other Data Collection Methods
  • Securities Law Concerns, Including Deceptive Conduct and MNPI
  • Best Practices for Due Diligence and Internal Processes
  • Compliance with Other Federal Laws and Regulations

For questions regarding any of the topics discussed, please contact JeffRobertJosh or Jonathan, or Christopher Wells or Michael Mavrides from our Hedge Funds group.

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Photo of Joshua M. Newville Joshua M. Newville

Joshua M. Newville is a partner in the Litigation Department and a member of Proskauer’s White Collar Defense & Investigations Group and the Asset Management Litigation team.

Josh handles securities litigation, enforcement and regulatory matters, representing corporations and senior executives in civil and…

Joshua M. Newville is a partner in the Litigation Department and a member of Proskauer’s White Collar Defense & Investigations Group and the Asset Management Litigation team.

Josh handles securities litigation, enforcement and regulatory matters, representing corporations and senior executives in civil and criminal investigations. In addition, Josh advises registered investment advisers and private fund managers on regulatory compliance, SEC exams, MNPI/insider trading and related risks.

Before joining Proskauer, Josh was senior counsel in the U.S. Securities and Exchange Commission’s Division of Enforcement, where he investigated and prosecuted violations of the federal securities laws. Josh served in the Enforcement Division’s Asset Management Unit, a specialized unit focusing on investment advisers and the asset management industry. His prior experience with the SEC provides a unique perspective to help asset managers manage risk and handle regulatory issues.

Photo of Jeffrey Neuburger Jeffrey Neuburger

Jeffrey Neuburger is co-head of Proskauer’s Technology, Media & Telecommunications Group, head of the Firm’s Blockchain Group and a member of the Firm’s Privacy & Cybersecurity Group.

Jeff’s practice focuses on technology, media and intellectual property-related transactions, counseling and dispute resolution. That expertise…

Jeffrey Neuburger is co-head of Proskauer’s Technology, Media & Telecommunications Group, head of the Firm’s Blockchain Group and a member of the Firm’s Privacy & Cybersecurity Group.

Jeff’s practice focuses on technology, media and intellectual property-related transactions, counseling and dispute resolution. That expertise, combined with his professional experience at General Electric and academic experience in computer science, makes him a leader in the field.

As one of the architects of the technology law discipline, Jeff continues to lead on a range of business-critical transactions involving the use of emerging technology and distribution methods. For example, Jeff has become one of the foremost private practice lawyers in the country for the implementation of blockchain-based technology solutions, helping clients in a wide variety of industries capture the business opportunities presented by the rapid evolution of blockchain. He is a member of the New York State Bar Association’s Task Force on Emerging Digital Finance and Currency.

Jeff counsels on a variety of e-commerce, social media and advertising matters; represents many organizations in large infrastructure-related projects, such as outsourcing, technology acquisitions, cloud computing initiatives and related services agreements; advises on the implementation of biometric technology; and represents clients on a wide range of data aggregation, privacy and data security matters. In addition, Jeff assists clients on a wide range of issues related to intellectual property and publishing matters in the context of both technology-based applications and traditional media.