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Category Archives: Private Equity Litigation

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Unicorns: The Tale Continues

Potential disputes involving unicorns have been a hot topic for the last several years.  We predicted that would continue this year in in our webinar and related blog post: The Top Ten Regulatory and Litigation Risks for Private Funds in 2018.  In April, the Regional Director of the SEC’s San Francisco office, Jina Choi, confirmed … Continue Reading

Voluntary Remediation and the SEC: Six Key Elements and Three Potential Pitfalls

A recent settled SEC order, In re Arlington Capital Management, Inc. and Joseph F. LoPresti, highlights the potential benefits of voluntarily taking steps to remediate conduct or practices that could run afoul of the SEC’s rules and standards. If done correctly, voluntary remediation can result in meaningful reductions in the sanctions sought by the SEC. … Continue Reading

Regulatory Scrutiny of the ICO Market – What Fund Managers Should Know

Last week, former CFTC Chairman Gary Gensler explained in remarks at M.I.T. that he believes the second and third most widely used virtual currencies—Ether and Ripple—may have been issued and traded in violation of securities regulations. This comes on the heels of a crackdown on cryptocurrency-related securities by the SEC, which is particularly focused on … Continue Reading

SEC Settles with Private Equity Fund Adviser over Alleged Conflicts of Interest

As a sign that the SEC is continuing to actively pursue private equity fund advisers, on April 24, 2018, the SEC announced a settlement with private equity fund adviser WCAS Management Corporation (WCAS) related to allegations of undisclosed conflicts of interest. The specific conflicts resulted from an allegedly undisclosed contractual arrangement whereby a portion of … Continue Reading

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

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

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

SEC Announces 2018 Compliance Outreach Program Seminar for Investment Advisers and Investment Companies

On Tuesday, February 13th, the Securities and Exchange Commission (SEC) announced the opening of registration for its 2018 national compliance outreach seminar for investment companies and investment advisers. The event is intended to help Chief Compliance Officers (CCOs) and other senior personnel at investment companies and investment advisory firms to enhance their compliance programs. … 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

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

Proskauer Private Investment Funds Group Releases Annual Review and Outlook

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

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

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

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

Veil-Piercing Under California Law – Heightened Risks for Fund Managers

We recently posted about the risks associated with veil-piercing claims and the ways in which fund managers can protect themselves from exposure to these claims. Our first post on veil-piercing focused on Delaware standards, while this post discusses California law. California law differs in several important respects from Delaware law on this topic. If a … Continue Reading

Veil Piercing/Alter Ego Determinations – How Fund Managers Can Protect Themselves

A veil piercing claim can be a worst-case scenario for a private fund manager dealing with a struggling portfolio company investment – the company fails, and ensuing legal claims are brought not only against the portfolio company, but also against the fund and its GPs. How can fund managers manage that risk? Limited liability is … Continue Reading

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

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 Chairman Identifies Guiding Principles

On July 12, 2017, newly appointed SEC Chairman Jay Clayton delivered a speech at the non-partisan Economic Club of New York wherein he set forth several high-level guiding principles for the agency.  In general, these remarks focused on (i) ensuring protections for retail investors, (ii) positioning the SEC as a regulator which is able to … Continue Reading

Valuation of Illiquid Portfolio Investments – Avoiding Regulatory Risks with Form and Substance

For private fund managers, the valuation of privately-held securities has been subject to heightened regulatory scrutiny. As the IPO on-ramp for private “unicorn” investments has lengthened, fund managers may hold illiquid investments for longer-than-expected time periods—and valuation-related risks increase as the time lengthens between purchase and exit.  This is the second of two blog posts … Continue Reading

Cyber Attack Protection Steps for Investment Firms

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

SEC Announces 2017 Compliance Outreach Program Seminars for Investment Companies and Investment Advisers

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

SEC Speaks: 2017 Enforcement and Exam Trends for Private Funds

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

The Top Ten Regulatory and Litigation Risks for Private Funds in 2017

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

Six Reasons Why a Wholesale Repeal of Dodd-Frank is Unlikely

In the days following the November elections, U.S. President-elect Donald J. Trump promised that his Financial Services Policy Implementation team would be working to “dismantle” the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). However, a more recent account in the Wall Street Journal reported Mr. Trump’s transition team as tempering his promise in … Continue Reading

Outgoing SEC Chair Reflects on the Agency’s Enforcement Program and Advocates for Increased Authority

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
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