Proskauer on Private Fund Litigation

Category Archives: Private Equity

Considerations for Private Fund Managers to Weather the Storm of COVID-19

By Howard J. Beber, Kirsten E. Lapham and Stephen T. Mears on March 24, 2020 Posted in News, Private Equity

As COVID-19 continues to spread around the world, it has become apparent that it is having a significant impact on the global financial market, at least for the short- to medium-term. While the only constant is change, there are steps private fund managers can take that will help them weather the storm and best position … Continue Reading

Cybersecurity and Fraud Risks for Fund Managers in the Wake of Coronavirus

By Alexandra V. Bargoot, Margaret A. Dale and Seetha Ramachandran on March 23, 2020 Posted in News, Private Equity

COVID-19 has created many new concerns for private fund managers; however, managers should be particularly mindful of heightened cybersecurity and fraud risks. With increased numbers of employees teleworking, there are increased vulnerabilities for cybercriminal intrusions creating privacy-related risks for fund portfolio information, LP confidential data, and other sensitive electronically-stored materials.… Continue Reading

When is a Cross Trade a Principal Trade? SEC Brings Enforcement Action Against a Fund Manager That Appears not to Have Understood

By Robert E. Plaze, Joshua M. Newville and Lucy C. Wolf on March 18, 2020 Posted in Compliance, Hedge Funds, OCIE, Private Equity, Regulation, SEC, Securities Law

Last month the SEC brought an enforcement action illustrating how cross trades can trip up a manager of a private fund. The SEC’s settlement with investment manager Lone Star Value Management LLC was based on allegations that the manager carried out a series of cross trades among funds it managed without disclosing to the client … Continue Reading

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

First Circuit Reverses District Court’s “Partnership-in-Fact” Holding and Finds Private Equity Funds Not Part of Controlled Group and Not Liable for Portfolio Company’s Pension Liabilities

By William D. Dalsen, Jennifer Rigterink, Timothy W. Mungovan, Ira G. Bogner, Ira Golub, Justin Alex, Adam Scoll, Michael R. Hackett and Alexandra V. Bargoot on November 27, 2019 Posted in Disputes, Private Equity, Private Equity Litigation, Uncategorized

Last Friday, the U.S. Court of Appeals for the First Circuit ruled that two co-investing Sun Capital private equity funds had not created an implied “partnership-in-fact” for purposes of determining whether the Sun Funds were under “common control” with their portfolio company, Scott Brass, Inc. (SBI) – resulting in a ruling that the Sun Funds … 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 Releases FY 2019 Enforcement Results: Increases in Investment Adviser Actions and Maintained Focus on Individual Accountability

By Samuel J. Waldon, Joshua M. Newville and Adam L. Deming on November 7, 2019 Posted in Disputes, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law

Yesterday the SEC announced its enforcement results for FY 2019, accompanied by a report from the Co-Directors of its Division of Enforcement. While the total number of actions increased slightly from 2018, the percentage of cases involving investment advisers or investment companies increased more dramatically, growing from 22% in 2018 to 36% in 2019, with … 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

Veil-Piercing Risks for Private Equity Managers Highlighted in Recent Court Decision

By Joshua M. Newville and Alexandra V. Bargoot on September 16, 2019 Posted in Disputes, Private Equity, Private Equity Litigation, Venture Capital

A recent case in a North Dakota district court is a reminder to private equity funds and managers that, under certain conditions, they may be held responsible for actions of a fund’s portfolio companies. Courts allow plaintiffs to pierce the corporate veil as a check against improper abuse of the corporate form. When one corporate … Continue Reading

Proposed Senate Bill Would Significantly Impact Certain Private Funds and Their Affiliates

By Anthony M. Drenzek, Joshua M. Newville and Stephen T. Mears on September 4, 2019 Posted in Compliance, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law

Recently, a group of Congress members introduced into Congress Senate Bill 2155 named the Stop Wall Street Looting Act of 2019. Although unlikely to be enacted into law as drafted, this proposed legislation would directly and substantially affect a number of fundamental operational aspects of private equity funds and their affiliates.… Continue Reading

Proskauer Launches Private Equity SEC Enforcement Tracker

By Timothy W. Mungovan, Howard J. Beber, Stephen T. Mears, Samuel J. Waldon, Joshua M. Newville and Brian A. Hooven on July 22, 2019 Posted in Compliance, Disputes, Private Equity, Private Equity Litigation, Regulation, SEC

Today, we are launching a proprietary database tracking all SEC enforcement actions involving private equity advisers. The tracker contains key information from the actions, including summaries of key issues, settlement terms, and relevant statutory provisions. The tracker will be an important resource for us and our clients, providing us with quick access to comparable cases … Continue Reading

DC Circuit Opinion Reaffirms Fiduciary and Disclosure Obligations of Advisers While Rejecting SEC Finding of “Willful” Violations

By Joshua M. Newville, Samuel J. Waldon, Anthony M. Drenzek and Ariella Muller on May 13, 2019 Posted in Disputes, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law

The DC Circuit recently released an opinion addressing the SEC’s administrative findings against registered investment adviser The Robare Group (TRG) for failure to disclose alleged conflicts of interest. Although the court affirmed the SEC’s finding of a violation of Section 206(2) of the Advisers Act, it held that Commission could not find willful violations under … 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

Valuation of Illiquid Securities as a Focus of Recent Enforcement Actions

By Joshua M. Newville and Brian A. Hooven on November 26, 2018 Posted in Compliance, Disputes, OCIE, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law

While the SEC consistently announces that valuation is a “key area of focus,” it is uncommon for regulators to “second guess” valuation determinations in the absence of other potential violations. However, recent actions would suggest that the SEC is particularly interested in the valuations and methodologies behind illiquid securities. As we have noted here before, … Continue Reading

2018 Annual Review and 2019 Outlook Highlights Private Equity Fund Litigation Risk Areas

By Timothy W. Mungovan, Michael R. Hackett and Brian A. Hooven on November 19, 2018 Posted in Disputes, Private Equity, Private Equity Litigation

In our recently released 2018 Annual Review and 2019 Outlook for Hedge Funds, Private Equity Funds and Other Private Funds, we note that innovative market disruptors, a maturing credit cycle, and a philosophical change in how the industry views and utilizes litigation are likely to lead to increased litigation risk for advisers (and their funds) … 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

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

Unicorns: The Tale Continues

By Joshua M. Newville, William D. Dalsen and Alexandra V. Bargoot on May 3, 2018 Posted in Compliance, Disputes, Examinations, Mergers & Acquisitions, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law, Venture Capital

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

By Samuel J. Waldon and Laura Stafford on May 3, 2018 Posted in Compliance, Examinations, OCIE, Private Equity, Private Equity Litigation, Regulation, SEC

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

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

By Anthony M. Drenzek and Michael R. Hackett on April 26, 2018 Posted in Compliance, Disputes, Examinations, OCIE, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law

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

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