The SEC has been active in the private equity space recently after being relatively quiet for some time. A recent enforcement action serves as a reminder for fund sponsors that regulators are continuing to look at fund sponsors’ practices relating to “operating partners,” particularly in the context of disclosures to limited partners. Continue Reading
On April 28, 2020, Treasury Secretary Mnuchin announced that companies that received loans of more than $2 million through the Paycheck Protection Program (“PPP”) of the CARES Act will be closely scrutinized. Mr. Mnuchin noted that the Small Business Administration (“SBA”) would audit the business to determine whether the certifications submitted in connection with the loan were truthful and accurate, and threatened that companies found to have made false certifications could face criminal consequences. Mr. Mnuchin’s announcement followed public outcry after reports surfaced that large, and even publicly-traded, companies received loans through the PPP. Against this backdrop, any company that received a loan through the PPP should be prepared to handle government requests for information as a potentially adversarial inquiry.
Though SEC scrutiny of performance results in fund marketing materials is nothing new, a recent settlement order suggests that the Commission continues to closely examine representations in marketing materials with respect to past investment performance.
Old Ironsides Energy, LLC, a Boston-based registered investment adviser, agreed to pay a $1 million penalty to settle SEC charges alleging a material misstatement in its fund marketing materials. In particular, the adviser’s marketing materials allegedly “identified a large, legacy investment with strong, positive returns as an early stage direct drilling investment” (“DDI”) over which the adviser “had direct management in partnership with project operators, when it was actually an investment in a private fund advised by a third party.” Continue Reading
The Novel Coronavirus (COVID-19) has significant implications for the asset management industry globally, forcing both sponsors and investors to consider the immediate impact on their investments, and to re-prioritize both immediate and longer term issues. In the United Kingdom, the Financial Conduct Authority (“FCA”) issued a series of communications to firms to address the impact of COVID-19 on the industry. Despite complexities caused by COVID-19, the FCA warns in its recently published 2020/21 Business Plan that it will remain vigilant to potential misconduct and reminds firms that where it finds poor practice, “[it] will clamp down with all relevant force”. Continue Reading
Going into 2020, we expected scrutiny over valuation methods to be one of the top regulatory risks for private funds. With ongoing economic uncertainty applying pressure, the SEC will continue to focus on valuation issues surrounding portfolio investments. Fund audit firms are not immune to regulatory scrutiny involving their professional obligations with respect to fund valuation issues. Continue Reading
The impact of the global coronavirus (COVID-19) outbreak has been rapidly evolving, causing disruption in global commerce across a wide range of industries. Private fund managers are not immune to the disruption. According to PitchBook’s latest analysis, private equity and venture capital still have record amounts of dry powder ($2.4 trillion) to weather the storm and step in to provide liquidity to businesses. However, operations, fundraising, deal sourcing, and performance will likely be negatively affected, at least in the near-term, by the economic deterioration caused by COVID-19. Continue Reading
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 themselves for the future.
Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help managae ongoing operations.