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Category Archives: Asset Management

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Asserting Reliance on Compliance Consultants as a Defense: Admissibility and Effectiveness

By James Anderson, Joshua M. Newville, Robert E. Plaze and Samuel J. Waldon on Posted in Asset Management, Compliance, Disputes, Enforcement, SEC, Securities Law
Asset managers commonly engage regulatory compliance consultants to aid them in addressing regulatory requirements and implementing compliance programs. The work of those compliance professionals can be drawn into SEC enforcement actions in various contexts.  See, e.g., ZPR Investment Mgmt. Inc. v. SEC (compliance consultant resigned when advice not followed and testified in proceeding). One such context … Continue Reading

European ESG Disclosure Requirements for Asset Managers

By Kirsten E. Lapham on Posted in Asset Management, Compliance, Private Equity, Regulation
New rules in Europe concerning sustainability-related disclosures in the financial sector will come into force from March 2021. Our UK regulatory specialists summarize the key aspects of the new ESG rules which will impact a wide range of financial services participants, including non-EU (i.e. U.S. fund managers) that market funds in the EEA. Read the full … Continue Reading

SEC Expands the “Accredited Investor” and “QIB” Definitions and the Permitted Scope of “Testing the Waters”

By Anthony M. Drenzek on Posted in Asset Management, Business Development Companies, Hedge Funds, Private Equity, Regulation, SEC, Securities Law
The Securities and Exchange Commission (SEC) recently approved amendments to the definition of an accredited investor found in Rule 501(a) of the Securities Act of 1933 that will facilitate the ability of funds and other issuers to raise capital through private placements. Several commenters on the SEC’s proposed rule cautioned that a rise in civil … Continue Reading

FinCEN Explains What Guides Its Enforcement Decisions

By Seetha Ramachandran and Hena M. Vora on Posted in Asset Management, Disputes, Enforcement, Regulation, White Collar
On August 18, 2020, the Financial Crimes Enforcement Network (FinCEN), which is the primary regulator and administrator of the Bank Secrecy Act (BSA), issued a statement on enforcement of the BSA. The requirements of the BSA typically apply to financial institutions, but in certain circumstances the Act applies to nonfinancial businesses and individuals.… Continue Reading

Private Equity and Cybersecurity: A Guide to Preparing for and Responding to a Breach

By Alexandra V. Bargoot, Margaret A. Dale and Samuel J. Waldon on Posted in Asset Management, Compliance, Cybersecurity, Disputes, OCIE, Private Equity, SEC
A cyber breach can have serious legal, financial, and reputational consequences for a fund sponsor, as described in our previous post. As such, cybersecurity threats must be treated as business risks, not just a potential IT problem. Senior management at fund sponsors should take the lead to ensure that the sponsor is taking appropriate actions … Continue Reading

Proskauer Partner Joshua Newville Discusses the SEC’s Focus on Valuation of Private Fund Investments

By Joshua M. Newville on Posted in Asset Management, Compliance, Examinations, OCIE, Private Equity, SEC
Proskauer partner Josh Newville discussed the SEC’s focus on valuation of private fund investments at the recent Securities Enforcement Forum West 2020. The global COVID-19 crisis has added a layer of complexity to the valuation process, requiring special care. As we predicted in our 2020 Top Ten Regulatory and Litigation Risks for Private Funds, ongoing … Continue Reading

A Fund Managers’ Guide to Maximizing D&O and E&O Insurance Coverage

By John Failla, Nathan Lander, Bradford Green and Joshua M. Newville on Posted in Asset Management, Compliance, Hedge Funds, Private Equity
“A Fund Managers’ Guide to Maximizing D&O and E&O Insurance Coverage” examines best practices for fund managers—particularly in the current economic climate—for negotiating and obtaining strong insurance protection and maximizing recovery when claims arise. As the economic impact of COVID-19 continues to reverberate across all global industries, there is an increased risk of claims being … Continue Reading

UK’s Financial Conduct Authority Warns That Fund Managers Are at Increased Risk of Cyber Attacks

By Kirsten E. Lapham on Posted in Asset Management, Compliance, Cybersecurity, News, Private Equity, Regulation
With 46% of UK business reporting a cyber attack during 2019/2020 and 32% reporting at least one a week – see the UK Government’s Cyber Security Breaches Survey 2020 – the UK’s Financial Conduct Authority (“FCA”) has issued a timely warning to market participants of increasing cyber security threats in the wake of COVID-19.… Continue Reading

ESG-Focused Fund Strategies Face SEC Scrutiny on Disclosures and Internal Procedures

By Joshua M. Newville and Kirsten E. Lapham on Posted in Asset Management, Compliance, OCIE, Private Equity, Regulation, SEC, Securities Law
As investors drive demand for investment products focused on environmental, social and governance (ESG) factors, fund managers have increasingly offered ESG-focused or “sustainable investing” funds. However, a recent speech by SEC Commissioner Elad Roisman has highlighted regulatory concerns for fund managers in the ESG space, particularly with respect to disclosures and internal compliance.… Continue Reading

Ten Tips for Navigating Risks and Liability at Portfolio Companies During COVID-19

By Timothy W. Mungovan, Michael R. Hackett, Jonathan M. Weiss, Alexandra V. Bargoot and Adam L. Deming on Posted in Asset Management, Compliance, Private Equity, Private Equity Litigation, Regulation
Many portfolio companies continue to confront business disruptions as a result of the COVID-19 pandemic. Even prior to the pandemic, we were seeing an uptick in litigation claims against sponsors and funds arising out of portfolio companies. The liquidity challenges since March have increased those risks at some companies. For sponsors, many of these risks … Continue Reading

SEC Cracks Down on Retirement Fund Advisers’ Undisclosed Compensation and Conflicts

By Alexandra V. Bargoot, Robert E. Plaze, Samuel J. Waldon and Joshua M. Newville on Posted in Asset Management, Compliance, Examinations, OCIE, Private Equity, Regulation, SEC, Securities Law
In August 2020, the SEC issued two orders against VALIC Financial Advisors Inc. (VFA) related to VFA’s management of 403(b) and 457(b) plans. These matters arise out of two of the SEC’s enforcement initiatives, the Teachers and Military Service Members’ Initiative and the Share Class Selection Disclosure Initiative. VFA is a registered investment adviser and … Continue Reading

Guide to “Recycling” Options for Fund Managers

By Edward Lee, Cameron Roper and Nick Rose on Posted in Asset Management, Private Equity
The ongoing COVID-19 crisis is presenting fund managers with numerous challenges. One key challenge is to make sure that their portfolio companies have sufficient capital available to weather this particular storm. But how can fund managers ensure the liquidity required by their funds and portfolio companies is available? Proskauer’s leading Private Investment Funds team examines … Continue Reading

What Fund Managers Need to Know About Price Gouging Laws

By Christopher E. Ondeck, Colin Kass and John R. Ingrassia on Posted in Asset Management, Compliance, Disputes, Hedge Funds, Private Equity, Regulation
A new and unprecedented investment environment has been created during the current COVID emergency as every state that has price gouging laws on its books has activated them, and states without official statues are regulating prices by executive order or existing consumer protection and unfair trade practice laws. Never before have price controls been active … Continue Reading

Misuse of Private Fund Assets Leads to SEC Enforcement and Industry Bar for Fund Manager

By Julia M. Ansanelli, Joshua M. Newville and Samuel J. Waldon on Posted in Asset Management, Disputes, Private Equity Litigation, SEC, Securities Law
In a cautionary tale about the career-limiting risks of SEC sanctions, a private fund adviser and its owner were found to have misused over $1 million of fund assets, resulting in a bar from the investment industry as well as a civil penalty. Monsoon Capital, LLC (Monsoon) is an SEC-registered investment adviser founded and owned … Continue Reading

Private Equity and Cybersecurity: Threats, Consequences, and the Regulatory Framework

By Alexandra V. Bargoot, Anthony M. Drenzek, Samuel J. Waldon and Margaret A. Dale on Posted in Asset Management, Compliance, Cybersecurity, Disputes, Examinations, FINRA, OCIE, Private Equity, Regulation, SEC
Cybersecurity breaches and threats are pervasive concerns for any entity storing valuable data or managing large sums of money: private investment funds are no exception.  Recently three private equity firms suffered breaches that compromised their email accounts and wire transfers, resulting in $1.3 million in losses.  We have seen the SEC follow through on its … Continue Reading

COVID-19: Heightened Potential for General Partner Clawbacks (and Disputes)?

By James Anderson, Timothy W. Mungovan, Howard J. Beber and Michael R. Hackett on Posted in Asset Management, Disputes, Private Equity
We at The Capital Commitment blog have previously discussed several steps for fund managers and others to weather the storm brought by COVID-19.  One of those steps is assessing the likelihood of a carried interest return obligation under a fund agreement’s general partner clawback provision (and planning for how to mitigate those obligations, if necessary).  … Continue Reading

Who Foots the Bill? SEC Cracks Down on Operating Partner Reimbursement Disclosures

By Hena M. Vora, Joshua M. Newville, Samuel J. Waldon and Michael R. Hackett on Posted in Asset Management, Compliance, Disputes, Private Equity, Private Equity Litigation, SEC, Securities Law
The SEC has been active in the private equity space recently after being relatively quiet for some time. A recent enforcement action serves as a reminder for fund sponsors that regulators are continuing to look at fund sponsors’ practices relating to “operating partners,” particularly in the context of disclosures to limited partners.… Continue Reading

Fund Adviser Receives $1 Million Penalty For Alleged Performance Misstatements in Private Fund Marketing Material

By Joshua M. Newville, Robert E. Plaze, Samuel J. Waldon, Brian A. Hooven and Adam L. Deming on Posted in Asset Management, Private Equity Litigation, SEC
Though SEC scrutiny of performance results in fund marketing materials is nothing new, a recent settlement order suggests that the Commission continues to closely examine representations in marketing materials with respect to past investment performance. Old Ironsides Energy, LLC, a Boston-based registered investment adviser, agreed to pay a $1 million penalty to settle SEC charges … Continue Reading

UK Measures to Address Covid-19

By Kirsten E. Lapham on Posted in Asset Management, Compliance, Private Equity, Regulation
The Novel Coronavirus (COVID-19) has significant implications for the asset management industry globally, forcing both sponsors and investors to consider the immediate impact on their investments, and to re-prioritize both immediate and longer term issues.  In the United Kingdom, the Financial Conduct Authority (“FCA”) issued a series of communications to firms to address the impact … Continue Reading
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