Proskauer on Private Fund Litigation

Joshua M. Newville

Joshua M. Newville is a partner in the Litigation Department in New York 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 and related risks.

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Portfolio Company Risk: Plaintiffs Set Sights on Sponsors and Board Directors

As our other Top Ten posts have demonstrated, there is no shortage of risks for private fund sponsors to navigate in today’s economic and regulatory environment. Nevertheless, they need to prioritize the risk that hits closest to home – lawsuits by private litigants seeking to pull sponsors, their funds, and their board director designees into … Continue Reading

SEC Risk Alert Highlights Renewed Focus on Insider Trading and MNPI Policies and Procedures for Fund Managers

By Joshua M. Newville on May 5, 2022 Posted in Asset Management, Compliance, Enforcement, Examinations, SEC, Securities Law

Last month, we predicted that a renewed focus by the SEC on insider trading, MNPI and related internal controls would be one of the Top Ten Regulatory and Litigation Risks for Private Funds in 2022. Last week, the SEC’s Division of Examinations (“EXAMS”) issued a timely risk alert relating to Investment Adviser Material Non-Public Information … Continue Reading

Conflicts of Interest: How High Will the Bar be Raised?

The SEC last month proposed rules under the Advisers Act indicating a dramatic shift in how the SEC intends to reduce conflicts of interest involving private fund managers and their investors. As we previously noted in the context of increased disclosure obligations, the SEC’s recent approach previews a sea change redefining the relationship between private … Continue Reading

The Trend of Increasing Disclosure Obligations for Private Funds Continues in 2022

Last month, the SEC proposed new rules under the Advisers Act that, if implemented, would be the most significant enhancement of disclosure obligations for private fund managers since the Dodd-Frank Act. Citing investor protection and transparency concerns for limited partners as investors, these proposals signal the Commission’s intent to add additional tools to the fund … Continue Reading

Insider Trading, MNPI and Related Internal Controls: A Renewed Focus by SEC

Over the past few years, the SEC has brought fewer insider trading and Material Non-Public Information (MNPI)-related cases compared to historical numbers. We expect to see a reversal of that trend in 2022. The SEC has provided some hints of its renewed focus on insider trading. First, even though the overall number of insider trading … Continue Reading

Increased Regulatory Focus on Privacy and Cybersecurity for Private Funds in 2022

2021 continued the trend of increased regulatory focus on privacy and cybersecurity for private investment funds in the U.S. and abroad. There are no signs of the trend leveling off any time soon. One of the topics that captured our attention last year was the rise of ransomware. As previously shared, ransomware has evolved from … Continue Reading

Economic Sanctions and Asset Seizures: An Important Focus for the Biden Administration

Sanctions continue to be a dynamic area of regulation and enforcement. In its first year, the Biden Administration has already undertaken a number of different sanctions initiatives. The three examples below highlight the range of strategies employed and their potential ramifications for private investment funds.… Continue Reading

Regulatory Shake-Out on Digital Assets: An Industry Waits for Additional Guidance

A threshold question in many cryptocurrency inquiries is whether the digital assets qualify as securities under the federal securities laws. If so, then they are subject to a full suite of federal securities regulations. If not, they still may be subject to AML and other DOJ regulations regarding currencies, as well as the Commodity Futures … Continue Reading

ESG: Practical Points For Where Market Practice and Legal Trends Collide

If 2021 was the year in which regulators and investors enthusiastically embraced environmental, social and governance (“ESG”) considerations, by creating new legal and regulatory frameworks, then 2022 will be the year for asset managers to identify and confront the practical challenges of integrating legal requirements and stakeholder expectations into investment policy and performance.… Continue Reading

Treating “Like for Like”: SPAC Disclosure, Marketing and Gatekeeping in 2022

We reported last year that unprecedented SPAC deal volume signaled an increased risk for disputes given their unique structure, including risks associated with disclosure requirements, material non-public information, valuation, and conflicts of interest. Our assessment proved prescient, as the SEC began to flex its enforcement muscles vis-à-vis SPACs as the year progressed, and took specific … Continue Reading

Decentralized Finance: The Next Frontier of SEC Enforcement

The SEC’s push to regulate the next generation of blockchain-based applications will likely give rise to disputes and enforcement actions, particularly in the developing decentralized finance (DeFi) space. Although DeFi has the potential to enhance or replace traditional financial products by speeding execution and reducing transaction costs using blockchain technology, the SEC presumes that actors … Continue Reading

Top Ten Regulatory and Litigation Risks for Private Funds in 2022

Last year, we wrote, “The regulatory and litigation risks for private funds are greater than at any time since the financial crisis in 2008.” That statement is even more true today. The Wall Street Journal recently published separate front-page stories on an SEC initiative to oversee large private companies and the explosive growth of the private … Continue Reading

California District Court Upholds SEC’s Novel “Shadow Trading” Theory

By Robert Leonard, Michael Mavrides, Joshua M. Newville, Jonathan Richman, Christopher Wells and Julia Alonzo on January 20, 2022 Posted in Disputes, Enforcement, Hedge Funds, Private Equity, SEC, Securities Law

The SEC prevailed on a motion to dismiss a closely watched lawsuit alleging that a company employee had engaged in insider trading based on news about a not-yet-public corporate acquisition when he purchased securities of a third-party company that was not involved in the deal. The January 14, 2022 decision in SEC v. Panuwat (N.D. … Continue Reading

Bloomberg Law: Growth of ESG-Related Investments & Regulatory Action

By Kirsten E. Lapham, Joshua M. Newville and Jonathan M. Weiss on January 7, 2022 Posted in Asset Management, Compliance, Enforcement, Regulation, Securities Law

As interest in environmental, social, and corporate governance (ESG) related funds grows, the regulatory landscape surrounding ESG in the US and the E.U. continues to evolve. Proskauer’s Kirsten Lapham, Joshua Newville and Jonathan Weiss share key implications for the asset management industry. Read the full Bloomberg Law article here. … Continue Reading

2021 SEC Enforcement Results – Takeaways for Fund Managers

By Joshua M. Newville and Samuel J. Waldon on November 23, 2021 Posted in Enforcement, Regulation, SEC, Securities Law

On November 18, 2021, the SEC’s Division of Enforcement announced its Enforcement Results for Fiscal Year 2021, and there are a few key takeaways for fund managers. In spite of the continued headwinds posed by the global COVID-19 pandemic, the Commission brought 697 enforcement actions in FY 2021. The Commission also filed 434 new enforcement … Continue Reading

Looking Ahead: Top Litigation and Regulatory Risks for Fund Managers Right Now (Webinar)

By William Komaroff, Kirsten E. Lapham, Dorothy Murray, Joshua M. Newville, Todd J. Ohlms, Seetha Ramachandran, Samuel J. Waldon and Jonathan M. Weiss on October 6, 2021 Posted in Asset Management, Compliance, Disputes, Private Equity, Private Equity Litigation, Regulation

The regulatory and litigation risks for private funds are greater than at any time since the financial crisis in 2008. From the continued proliferation of digital assets and cryptocurrencies, to the unprecedented activity in SPACs (many of which are merging with PE-backed portfolio companies), to the increased focus on ESG under the Biden Administration, new … Continue Reading

SEC Is Exploring Reforms Regarding Private Fund Disclosure Of Conflicts Of Interest And Fees and Expenses

By Joshua M. Newville and Samuel J. Waldon on September 20, 2021 Posted in Asset Management, Compliance, Regulation, SEC, Securities Law

On September 14, 2021, U.S. Securities and Exchange Commission Chair Gary Gensler testified before the Senate Committee on Banking, Housing, and Urban Affairs. During his testimony, he stated that the SEC is exploring “potential reforms” regarding investment funds and managers. Chair Gensler explained that one of the potential reforms under consideration by the SEC was … Continue Reading

U.S. Federal Regulators Turn Up the Heat on Cryptocurrency Trading Platforms

By Julia M. Ansanelli, Joshua M. Newville, Seetha Ramachandran and Samuel J. Waldon on August 27, 2021 Posted in Compliance, Cryptocurrency, Enforcement, Regulation, SEC, Securities Law, White Collar

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 … Continue Reading

MNPI Update – SEC Pursues “Shadow Trading” Insider Trading Case

By Michael Mavrides, Robert Leonard, Joshua M. Newville, Jonathan Richman and Samuel J. Waldon on August 25, 2021 Posted in Disputes, Enforcement, Hedge Funds, Private Equity, SEC, Securities Law, White Collar

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 … Continue Reading

Space SPAC Draws SEC Enforcement Action for Allegedly Misleading Disclosures and Due Diligence Failures

By Joshua M. Newville and Samuel J. Waldon on July 22, 2021 Posted in Asset Management, Compliance, Disputes, Enforcement, Regulation, SEC, Securities Law, SPACs

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 … Continue Reading

Three Key Considerations for Fund Sponsors when Participating in Bankruptcy Proceedings

By Joshua M. Newville, Samuel J. Waldon and Erica T. Jones on July 6, 2021 Posted in Asset Management, Compliance, Disputes, Enforcement, Examinations, Private Equity, Regulation, SEC, Securities Law

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 … Continue Reading

Navigating Brexit: What Funds Should Look Out for as the Dust Begins to Settle

By Margaret A. Dale, Michael R. Hackett, Kirsten E. Lapham, William Komaroff, Timothy W. Mungovan, Dorothy Murray, Joshua M. Newville, Todd J. Ohlms, Seetha Ramachandran, Ana Vermal, Samuel J. Waldon, Jonathan M. Weiss, Anthony M. Drenzek, James Anderson, William D. Dalsen, Adam L. Deming, David W. Heck, Hena M. Vora and Lucy C. Wolf on May 24, 2021 Posted in Asset Management, Compliance, Enforcement, Private Equity, Regulation

As a result of Brexit, UK-regulated firms will already have grappled with loss of passporting and equivalence measures, and the need to navigate national regimes and relocate staff. As of today, EU firms operating in the UK have a temporary permissions regime with the UK having set out its approach to equivalence, but this remains … Continue Reading

Private Credit Lenders Should Remain Vigilant in 2021

By Margaret A. Dale, Michael R. Hackett, Kirsten E. Lapham, William Komaroff, Timothy W. Mungovan, Dorothy Murray, Joshua M. Newville, Todd J. Ohlms, Seetha Ramachandran, Ana Vermal, Samuel J. Waldon, Jonathan M. Weiss, Anthony M. Drenzek, James Anderson, William D. Dalsen, Adam L. Deming, David W. Heck, Hena M. Vora and Lucy C. Wolf on May 20, 2021 Posted in Asset Management, Compliance, Disputes, Private Credit

Private credit lenders began 2020 facing the dual challenges of an increased risk of defaults and a lack of strong financial covenants, and the pandemic sparked a significant increase in defaults to 8.1% in Q2. However, borrower defaults in Q3 and Q4 were lower than anticipated following the COVID-fueled spike in Q2, due in part to … Continue Reading

Focus on ESG Will Continue to Grow Under Biden Administration

By Margaret A. Dale, Michael R. Hackett, Kirsten E. Lapham, William Komaroff, Timothy W. Mungovan, Dorothy Murray, Joshua M. Newville, Todd J. Ohlms, Seetha Ramachandran, Ana Vermal, Samuel J. Waldon, Jonathan M. Weiss, Anthony M. Drenzek, James Anderson, William D. Dalsen, Adam L. Deming, David W. Heck, Hena M. Vora and Lucy C. Wolf on May 13, 2021 Posted in Asset Management, Compliance, Enforcement, Regulation, SEC

In 2021, the global impact of environmental, social and corporate governance (“ESG”) investing will continue to grow, with key implications for the asset management industry. The new European regime on sustainability-related disclosures in the financial sector will roll out in March 2021, affecting both European and non-European asset managers alike. In the U.S., where there … Continue Reading

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