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Over the past week, the U.S., UK, and EU imposed sweeping sanctions rolled out by the US, in response to Russia’s invasion of Ukraine, outlined here. Also last week, the Department of Justice announced the launch of Task Force KleptoCapture to enforce these sanctions and seize assets belonging to sanctioned individuals and other criminal actors. Attorney General Merrick B. Garland made clear that the U.S. “will leave no stone unturned in our efforts to investigate, arrest, and prosecute those whose criminal acts enable the Russian government to continue this unjust war.”

As the financial services industry prepares for expanded criminal and civil enforcement under the Bank Secrecy Act (“BSA”) with the passage of the Anti-Money Laundering Act of 2020, FinCEN’s recent case against Capital One shows how FinCEN’s approach to AML enforcement is evolving.

On August 18, 2020, the Financial Crimes Enforcement Network (FinCEN), which is the primary regulator and administrator of the Bank Secrecy Act (BSA), issued a statement on enforcement of the BSA. The requirements of the BSA typically apply to financial institutions, but in certain circumstances the Act applies to nonfinancial businesses and individuals.

Cybersecurity breaches and threats are pervasive concerns for any entity storing valuable data or managing large sums of money: private investment funds are no exception.  Recently three private equity firms suffered breaches that compromised their email accounts and wire transfers, resulting in $1.3 million in losses.  We have seen the SEC follow through on its 2019 priority of examining investment advisers about their cyber-security measures, as well as inquiring if they have suffered from a cyber-security breach.  We expect that trend to continue.  Fund sponsors should be aware of (1) the key cyber threats they face, (2) the consequences of a breach, and (3) the statutory and regulatory framework governing cybersecurity.  Fortunately, there are precautionary measures that fund sponsors can implement to help prevent a breach and to mitigate the scope and damage from a breach if one were to occur. We will elaborate on both the steps to take to guard against a breach and how to effectively respond to a breach in a forthcoming post.

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 aspects of the judicially created body of insider trading law. Although we understand that the Senate is unlikely to consider this legislation at least in the near term, the bill’s provisions – if ever enacted – could make it easier for the government to prove insider trading cases, at least against individuals.

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 recommended practices that advisers should consider when preparing for 2020.

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…

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 the laws and protect American investors.

Jackson and Bharara recognize that individuals facing liability should have more clarity about what the law is.  For those of us who regularly advise fund managers on compliance with insider trading rules, more clarity would be a welcome development.

According to recent news reports, the DOJ and the SEC are investigating the possible improper use of third-party broker quotes by hedge fund managers to value illiquid debt securities in their portfolios. Prosecutors are reportedly focused on possible instances where fund managers allegedly solicited predetermined or improper quotes from brokers, and used those estimates to inflate their own valuations of thinly-traded mortgage bonds.

In addition, the co-head of the SEC’s Asset Management Unit recently highlighted that unit’s focus on valuation, particularly where registered advisers failed to follow their own internal procedures when valuing illiquid positions. The SEC’s focus is further demonstrated by a recent action against a fund manager for improperly valuing municipal bonds inconsistently with GAAP.

Partners Timothy W. Mungovan (co-head of Private Equity & Hedge Fund Litigation Group) and Christopher M. Wells (head of Hedge Funds Group)  have been invited to join a large collection of senior regulators at the Regulatory Compliance Association’s Enforcement, Compliance & Operations (ECO) 2016 Symposium.  The conference will take place on Tuesday May 17 at the Mandarin Oriental Hotel in New York City.

Tim will be chairing the session entitled: “Enforcement 2016 – New Priorities, Initiatives and Latest Developments.”

Chris will be chairing the panel entitled: “SEC Exam and NFA Audit Practice: 2016 Areas of Focus with Case Studies.”