According 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 … Continue Reading
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 … Continue Reading
On 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 … Continue Reading
At 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 … Continue Reading
Private 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 … Continue Reading
On 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 … Continue Reading
On November 18, 2016, outgoing SEC Chair Mary Jo White delivered a speech at New York University School of Law entitled “A New Model for SEC Enforcement: Producing Bold and Unrelenting Results.” Chair White’s remarks covered a broad range of enforcement initiatives and outcomes from her tenure as SEC Chair. This post summarizes the aspects … Continue Reading
In the wake of the election of Donald Trump as the 45th President of the United States, Mary Jo White has announced her intent to step down from her role as Chair of the Securities and Exchange Commission. Chair White, the 31st and one of the longest-serving Chairs of the SEC, will be leaving her … Continue Reading
The SEC’s Office of Compliance Inspections and Examinations (OCIE) recently published a risk alert noting that the SEC exam staff intends to examine registrants’ compliance with the Dodd-Frank Act’s whistleblower provisions. OCIE intends to examine registered advisers for compliance, in light of recent enforcement cases the SEC has filed based on violations of the Dodd-Frank … Continue Reading
On October 17, 2016, Marc Wyatt, the Director of the SEC’s Office of Compliance, Inspection and Examinations, gave a keynote address to the National Society of Compliance Professionals titled: Inside the National Exam Program in 2016. In addition to discussing his general perspective concerning the program, he provided some key statistics that help put OCIE’s … Continue Reading
The number of private equity fund restructurings is likely to rise in the coming years. The current economic expansion will inevitably come to an end (at 87 months and counting, this expansion is already the third longest post-WWII) making exits more challenging, just as the terms expire on funds raised during the “golden era” (2003-2007). … Continue Reading
The Securities and Exchange Commission today announced its enforcement results for fiscal year 2016, reaching new highs in the number of actions filed and money ordered forfeited through disgorgement and penalties. The SEC noted that it brought the most ever cases involving investment advisers or investment companies, including 8 enforcement actions related to private equity advisers, an area … Continue Reading
As the elections approach nationwide, advisers to private investment funds with current or prospective state or local government entity investors should be mindful of political activities by their personnel which could raise concerns under existing pay-to-play regulations. While seemingly straightforward in application, the SEC’s pay-to-play regulations have the potential to present a number of complex … Continue Reading
Valuation is typically near the top of the list when the SEC’s enforcement division and exam staff disclose their priority topics for private funds. We expect that trend to continue and, if anything, the focus on valuation is likely to increase, especially as the market for unicorns shakes out. That said, the SEC rarely challenges … Continue Reading
A recent SEC settlement of whistleblower charges should serve as a useful reminder for private fund sponsors to conduct a comprehensive review of their policies and procedures. On August 10, 2016, the SEC announced that BlueLinx Holdings Inc., an Atlanta-based building products distributor, had settled charges that it violated securities laws by using severance agreements … Continue Reading
On May 11, 2016, the federal Defend Trade Secrets Act (DTSA) became law. The DTSA provides trade-secret protections on the federal level that are similar to those available through the Uniform Trade Secrets Act (UTSA) adopted (with variations) in 48 States. The DTSA will have at least three effects upon private funds, particularly those with … Continue Reading
As we have previously observed, private fund advisers face a difficult challenge when SEC guidance (in the form of a speech or a public enforcement order) indicates that certain long-standing practices may be contrary to the securities laws. What does an adviser do when its past practices appear, in hindsight, to have fallen short? While … Continue Reading
In an order dated June 14, 2016, the Securities and Exchange Commission (SEC) adopted its prior proposal to increase the net worth threshold for “qualified clients” under Rule 205-3 of the Investment Advisers Act of 1940 (the Advisers Act) from $2 million to $2.1 million. This adjustment is being made pursuant to a five-year indexing … Continue Reading
Is your organization equipped to stay on top of regulator demands? Join Proskauer’s Tim Mungovan, co-head of the Private Equity & Hedge Fund Litigation Group, and Marsh’s FINPRO U.S. Chief Innovation Officer Machua Millett on June 15 at 2:00 p.m. ET for a webinar on the new regulatory landscape for financial institutions. The webcast will … Continue Reading
The SEC is continuing its pattern of establishing “standards of conduct” for the private equity industry through speeches, enforcement actions, and public settlements. After foreshadowing its concerns in various speeches over the last three years, the SEC recently returned its attention to the “unregistered broker” issue. In a settlement announced last week, the SEC asserted … Continue Reading
On May 16, 2016, six federal agencies issued a joint release inviting public comment on a proposed rule to prohibit or condition certain incentive-based compensation arrangements. This proposed rule was mandated by section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) and is a revision of the proposed rule the agencies … Continue Reading
On Wednesday, May 18, 2016, the U.S. Securities and Exchange Commission (SEC) proposed to increase the net worth threshold for qualified clients from $2 million to $2.1 million. This proposed adjustment is being made pursuant to a five-year indexing adjustment required by §205(e) of the Investment Advisers Act of 1940 (the Advisers Act), as amended … Continue Reading
In the wake of a host of negative developments, Theranos Inc. is reportedly under investigation by the Department of Justice and the Securities and Exchange Commission. The SEC and DOJ inquiries are likely to focus on whether Theranos misled investors about the state of its technology and operations. Even beyond potential misrepresentation issues, we believe … Continue Reading
Partners Timothy W. Mungovan (co-head of Private Equity & Hedge Fund Litigation Group) and Christopher M. Wells (head of Hedge Funds Group) have been invited to join a large collection of senior regulators at the Regulatory Compliance Association’s Enforcement, Compliance & Operations (ECO) 2016 Symposium. The conference will take place on Tuesday May 17 at … Continue Reading
