Proskauer on Private Fund Litigation

Category Archives: Hedge Funds

Top Ten Regulatory and Litigation Risks for Private Funds in 2020

The private fund industry is more in the public eye than ever before. Private capital and private markets have experienced massive growth over the last two decades, substantially outpacing the growth of public equity. We have witnessed that trend continue during the past year, and have worked with our clients to navigate the greater uncertainty … Continue Reading

House Passes Proposed Legislation Defining Insider Trading

By Jonathan Richman and Joshua M. Newville on December 12, 2019 Posted in Compliance, Hedge Funds, SEC, Securities Law

Since the Second Circuit’s 2014 decision in United States v. Newman triggered a debate about the personal benefit requirement, several bills have been introduced in Congress to define insider trading. The most recent effort is H.R. 2534, the Insider Trading Prohibition Act, which the House of Representatives passed overwhelmingly last week. The bill would codify certain … Continue Reading

Proskauer Private Investment Funds Group Releases 2019 Annual Review and Outlook

By Anthony M. Drenzek on November 27, 2019 Posted in Compliance, Disputes, Hedge Funds, OCIE, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law, Venture Capital

Proskauer’s Private Investment Funds Group recently released its 2019 Annual Review and Outlook for Hedge Funds, Private Equity Funds and Other Private Funds. This yearly publication provides a summary of some of the significant changes and developments that occurred in the past year in the private equity and hedge funds space, as well as certain … Continue Reading

SEC Announces the Formation of Asset Management Advisory Committee

By Anthony M. Drenzek, Hena M. Vora and Michael R. Hackett on November 6, 2019 Posted in Compliance, Hedge Funds, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law, Venture Capital

As a further indication of the SEC’s focus on the asset management industry, on November 1, 2019 the Commission formally established an Asset Management Advisory Committee. This follows the SEC’s recent announcement of its intent to establish the committee.… Continue Reading

SEC Fines Fund Manager $5 Million Over Undervaluation of Assets

By Joshua M. Newville and Brian A. Hooven on June 25, 2019 Posted in Compliance, Disputes, Hedge Funds, Regulation, SEC, Securities Law

A recent action where the SEC focused on the presumably conservative undervaluation of assets suggests that it is more than willing to use valuation as a hook to deter “smoothing” of returns. As we previously noted, while the SEC consistently announces that valuation is a “key area of focus,” it is uncommon for regulators to … Continue Reading

Delaware Chancery Declines Post-Filing Use of Section 220 Books and Records Inspection Request

By Hena M. Vora, Lucy C. Wolf and Michael R. Hackett on February 26, 2019 Posted in Disputes, Hedge Funds, Private Equity, Private Equity Litigation, Venture Capital

A recent decision by the Delaware Chancery Court suggests that a litigant might forego the ability to file a books and records request if it waits to do so until after the lawsuit is filed. Last month the Delaware Chancery Court dismissed just such an action, characterizing the request for a books and records inspection … Continue Reading

The Top Ten Regulatory and Litigation Risks for Private Funds in 2019

An increasingly sophisticated and active OCIE division, innovative market disruptors, a maturing credit cycle, and a philosophical change in how the private fund industry views and utilizes litigation are likely to lead to increased regulatory scrutiny and litigation risk for advisers (and their funds) in 2019. With that backdrop, we are pleased to present our … Continue Reading

SEC Staff Announces 2019 OCIE Examination Priorities

By Anthony M. Drenzek on January 15, 2019 Posted in Compliance, Hedge Funds, OCIE, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law, Venture Capital

The SEC’s Office of Compliance Inspections and Examinations has released its annual priorities publication for 2019. Containing both a look back at the program’s accomplishments for fiscal year 2018 and a look forward into its initiatives for 2019, this annual report sets out important guidance for private fund managers in administering their compliance programs and … Continue Reading

Proskauer Private Investment Funds Group Releases 2018 Annual Review and Outlook

By Anthony M. Drenzek on November 15, 2018 Posted in Compliance, Hedge Funds, OCIE, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law, Venture Capital

Proskauer’s Private Investment Funds Group today released its 2018 Annual Review and Outlook for Hedge Funds, Private Equity Funds and Other Private Funds. This yearly publication provides a summary of some of the significant changes and developments that occurred in the past year in the private equity and hedge funds space, as well as certain recommended … Continue Reading

WSJ Article on Geolocation Data Highlights Risks for Fund Managers

By Joshua M. Newville and Jeffrey Neuburger on November 6, 2018 Posted in Compliance, Hedge Funds, Regulation

On Friday, the WSJ published an article detailing how companies are monetizing smartphone location data by selling it to hedge fund clients. The data vendor featured in the WSJ article obtains geolocation data from about 1,000 apps that fund managers use to predict trends involving public companies. However, as we’ve noted, the use of alternative … Continue Reading

Bharara Task Force on Insider Trading

By Joshua M. Newville and Samuel J. Waldon on October 15, 2018 Posted in Compliance, Hedge Funds, Regulation, SEC, Securities Law

Former SDNY U.S. Attorney Preet Bharara and SEC Commissioner Jackson recently announced, via NY Times op-ed, the creation of the Bharara Task Force on Insider Trading. Based on the premise that U.S. insider trading laws are unclear and hopelessly out of date, the task force intends to propose new insider trading reforms to help clarify … Continue Reading

SEC Extends Registration Requirements for Investment Companies and Broker Dealers to ICOs and other Digital Assets

By Joshua M. Newville, Samuel J. Waldon, Robert E. Plaze and Lucy C. Wolf on September 25, 2018 Posted in Examinations, Hedge Funds, Regulation, SEC, Securities Law

Fund managers take note – after over a year of warning, this month the SEC announced a pair of settlement orders with respect to registration requirements for a fund and broker dealer operating in the crypto and digital assets space. It was the agency’s first ever enforcement actions applying the investment company and broker-dealer registration … Continue Reading

Mt. Gox Debacle Showcases Cryptocurrency Litigation Concerns

By Joshua M. Newville and Brian A. Hooven on September 6, 2018 Posted in Compliance, Hedge Funds, Private Equity, Private Equity Litigation

The theft of millions of bitcoins and related failure of cryptocurrency exchange Mt. Gox—recently written about in the Wall Street Journal—provides a perfect example of how cryptocurrency-related issues can blossom into one of our Top Ten Regulatory and Litigation Risks. The WSJ article chronicles the journey of Kim Nilsson—one of the victims of the $400 … Continue Reading

SEC Staff Issues Risk Alert on the Six Most Frequent Fee and Expense Compliance Issues

By Robert E. Plaze, Joshua M. Newville, Robert Leonard and Anthony M. Drenzek on April 19, 2018 Posted in Compliance, Hedge Funds, OCIE, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law, Venture Capital

On April 12, 2018, the SEC’s Office of Compliance Inspections and Examinations issued a risk alert listing the most common compliance issues concerning fees and expenses charged by SEC-registered investment advisers. Advisers should review their practices, policies and procedures to ensure compliance with their advisory agreements and representations to clients in light of the fee … Continue Reading

Proskauer Adds Former SEC Enforcement Counsel, Samuel Waldon, As Partner Strengthening Its Securities Litigation Offering

By Timothy W. Mungovan on April 10, 2018 Posted in Compliance, Disputes, Examinations, Hedge Funds, OCIE, Private Credit, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law, Venture Capital, Whistleblower

We are pleased to announce that partner Samuel Waldon has joined Proskauer’s Litigation Department in DC, enhancing the Firm’s securities litigation and regulatory enforcement practices. Among his other areas of focus, Sam will bolster the firm’s Asset Management Litigation team. “In today’s ever evolving regulatory landscape, Sam’s extensive experience at the SEC and his deep … Continue Reading

The Top Ten Regulatory and Litigation Risks for Private Funds in 2018

With the public equity markets at an all-time high and private equity fund raising setting new records, it might seem counterintuitive to forecast litigation and regulatory risks. The opposite is true. Disputes typically follow capital, and the steeper the growth curve, the greater the risk of litigation and regulatory scrutiny. With that backdrop, we are … Continue Reading

Chairman Clayton Asks Lawyers to Knock it Off with the Unregistered Coin Offerings

By Joshua M. Newville and Jeffrey Neuburger on January 23, 2018 Posted in Hedge Funds, Private Equity Litigation, Regulation, SEC, Securities Law

In his recent remarks at the Securities Regulation Institute, SEC Chairman Jay Clayton had some stern words for market professionals, especially lawyers, involved in initial coin offerings (ICOs). He expressed concern that lawyers in the space “can do better” in their role as gatekeepers to the securities markets, particularly in advising clients whether the “coin” … Continue Reading

Five Things to Think About Before a Surprise SEC Exam

By Joshua M. Newville, Robert E. Plaze, Christopher Wells and Alexandra V. Bargoot on December 21, 2017 Posted in Compliance, Examinations, Hedge Funds, Private Equity, Regulation, SEC

If a team from the SEC arrives at your office and says, “We are conducting an on-site examination and would like to talk to the CCO right now,” are you prepared? A handful of registered investment advisers have faced surprise SEC exams in recent months. These exams come in two flavors: either a “for cause” … Continue Reading

Proskauer Private Investment Funds Group Releases Annual Review and Outlook

By Anthony M. Drenzek and Michael R. Hackett on November 29, 2017 Posted in Compliance, Hedge Funds, OCIE, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law, Venture Capital

Proskauer’s Private Investment Funds Group recently released its 2017 Annual Review and Outlook for Hedge Funds, Private Equity Funds and Other Private Funds. This yearly publication provides a summary of some of the significant changes and developments that occurred in the past year in the private equity and hedge funds space, as well as certain … Continue Reading

SEC Releases FY 2017 Enforcement Results: Maintaining Focus on Individual Accountability and Investment Advisers

By Joshua M. Newville, Michael R. Hackett, Anthony M. Drenzek and Alexandra V. Bargoot on November 16, 2017 Posted in Compliance, Hedge Funds, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law

Last night, the SEC announced its enforcement results for the Fiscal Year 2017, accompanied by a report from the Co-Directors of its Division of Enforcement. While the total number of actions was down slightly from 2016, the percentage of those cases involving investment advisers or investment companies – 18% – remained consistent, and amounted to … Continue Reading

U.S. House Bill Aims to Curtail SEC Staff’s Ability to Obtain Algorithmic Trading Source Code

By Christopher Wells, Robert Leonard, Michael Mavrides, Joshua M. Newville, Anthony M. Drenzek and Lucy C. Wolf on November 3, 2017 Posted in Compliance, Hedge Funds, OCIE, Private Equity Litigation, Regulation, SEC, Securities Law

On October 4, 2017, U.S. Representative Sean P. Duffy [R-WI-7] introduced U.S. House of Representatives Bill H.R.3948 entitled the “Protection of Source Code Act.” If enacted, the Bill would amend the Securities Act, the Securities Exchange Act, the Investment Company Act and the Investment Advisers Act to prohibit the SEC staff from obtaining algorithmic trading … Continue Reading

Pay-to-Play – SEC Expands Scope of Rule to CABs

By Lucy C. Wolf, Anthony M. Drenzek, Michael R. Hackett and Joshua M. Newville on October 12, 2017 Posted in Compliance, Examinations, FINRA, Hedge Funds, OCIE, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law, Venture Capital

The SEC’s pay-to-play rule has given advisers reason to worry about potential foot faults since its adoption. As we have noted in prior posts, the rule is filled with landmines and is therefore difficult to navigate. As was evident from the SEC’s announcement of a series of settlements of alleged pay-to-play violations in early 2017, even … Continue Reading

Snap Judgment: Unicorns Under Pressure and Addressing Risks of Private Lawsuits

By Joshua M. Newville, William D. Dalsen and Alexandra V. Bargoot on September 18, 2017 Posted in Disputes, Hedge Funds, Mergers & Acquisitions, Private Equity, Private Equity Litigation, SEC, Venture Capital

The recent IPOs of Snap, Inc. and Blue Apron indicate that while the IPO pipeline continues to flow, there may be a cautionary tale for “unicorns” – venture-backed companies with estimated valuations in excess of $1 billion. After Snap went public in March, it posted a $2.2 billion loss in its first quarter, yielding a … Continue Reading

SEC Speaks on Initial Coin Offerings: Tokens May Be Securities

By Jeffrey Neuburger, Joshua M. Newville and Alexandra V. Bargoot on August 24, 2017 Posted in Compliance, Examinations, Hedge Funds, News, Private Equity, Regulation, SEC, Securities Law

Initial Coin Offerings (“ICOs”) are generating attention from both investors and the SEC. Investors’ interest is indicated by the more than $1.2 billion that ICOs reportedly have raised so far this year. Meanwhile, the SEC has recently asserted its authority in the space, releasing a report stating that digital tokens issued by ICO platform “The … Continue Reading