As we head further into 2025, the landscape of SEC exams and enforcement is poised for significant shifts. How will the SEC adapt to emerging trends and evolving market dynamics? In the first issue of Beyond the Deal in 2025, four of our regulatory lawyers weigh in on what to
2024 SEC Enforcement Results – Takeaways for Fund Managers
On November 22, 2024, the SEC’s Division of Enforcement announced its Enforcement Results for Fiscal Year 2024. Below are some key takeaways for fund managers:
- Total enforcement actions were down from recent years. The Commission brought 583 total enforcement actions in FY 2024, which represents a 25% decrease from FY
Harris’s Running Mate Announcement: Pay-to-Play Rule Implications for Investment Advisers
As reported today, Vice President Harris has announced Tim Walz, the sitting governor of Minnesota, as her running mate. This announcement is particularly significant for investment advisers due to the Advisers Act Political Contributions Rule, otherwise known as the “pay-to-play” rule.
Unrepresentative Returns: SEC Sanctions Hedge Fund Manager for Misleading Marketing Practices
On June 14, 2024, the SEC announced an enforcement action settlement with a Pennsylvania-based hedge fund manager for violating the Marketing Rule under the Investment Advisers Act. The SEC found that the adviser had misled investors by advertising a hedge fund’s investment performance based on the investment performance of a
Mid-Year Enforcement Update: SEC’s Continued Focus on Private Funds in 2024
As we reach the midpoint of 2024, the SEC’s enforcement actions continue to shape the private funds industry. From the continuing off-channel recordkeeping sweep to heightened scrutiny on AI claims, fiduciary obligations of fund managers, and insider trading, the SEC is as vigilant as ever. Compounding these efforts are significant
Key Steps for Fund Managers to Avoid Scrutiny Under the SEC’s Pay-to-Play Rule
The SEC’s recent settlement involving a “pay-to-play” rule violation by a private equity firm is a timely reminder for fund managers, especially with the November elections approaching.
As a refresher, Rule 206(4)-5 of the Investment Advisers Act – known as the “pay to play” rule – prohibits investment advisers from receiving compensation for providing advisory services to state and municipal entities for two years after the adviser or one of its “covered associates” makes certain political contribution to candidates for public office. Note that the SEC Enforcement Division staff periodically reviews public campaign contribution reports (which are publicly available online) to identify donations by individuals associated with investment advisers.
How Governmental Carrots and Sticks Impact Private Investment in Defense Tech and the Security Ecosystem
In response to rising geopolitical tensions – from the Middle East to the Taiwan Strait to the ongoing conflict in Ukraine –the Biden Administration is increasingly using economic incentives and sanctions to assist the United States’ foreign policy objectives or mitigate the risk of increased conflict.
The Macro-Economic Environment: What It Means for VC Firms
Hope for a resurgence during 2024 in Venture Capital fundraising, investment, and returns was strong at the beginning of this year, with optimism fueled by the recovery in 2023 of U.S. stock markets (lead by the performance of large tech companies) and anticipation about how AI might transform industries. Market observers were optimistic then that U.S. venture investment activity would pick up significantly from 2023 levels, which—based on PitchBook data—had reverted to the lower average level of investment seen during the period of 2018-2020 as compared to the robust levels of activity seen in 2021 and the first half of 2022. This hope was centered in large part on expectations about how the Federal Reserve would begin lowering interest rates.
Is Artificial Intelligence Inflating a Valuation Bubble?
Big fund-raising rounds and high valuations have some wondering whether the AI sector is in a bubble in the nature of the dotcom boom. As of this writing, OpenAI is valued at over $80 billion; Amazon added another $2.75 billion to its investment in Anthropic; and even some very early-stage startups, like France-based Mistral AI, have racked up hundreds of millions in venture-capital funding at valuations over a billion dollars. Alphabet CEO Sundar Pichar has said AI could be more profound than the invention of electricity or the discovery of fire. Is the hype real?
Cybersecurity Continues to be a Focal Point for Regulators in 2024
The SEC’s new and proposed rules on cybersecurity and cyber-incident reporting will have a dual impact on private investment advisers and funds.
First, the proposal by the SEC will impose cybersecurity related obligations on investment advisers, registered investment companies and business development companies, with a final rule in this sector (the “adviser cybersecurity rule”) expected in April 2024.