Proskauer on Private Fund Litigation

Tag Archives: Investment Adviser

Are Syndicated Term Loans Securities? The SEC Declines to Weigh in on Kirschner

Participants in the syndicated loan markets may have been relieved last month when the SEC declined to file the amicus brief requested by the Second Circuit Court of Appeals in Kirschner v. JP Morgan Chase Bank. In an unusual turn of events, the SEC choose not to weigh in on whether the syndicated term loans at … Continue Reading

Regulators’ Increased Focus on GP-Led Secondaries and Continuation Funds

As IPOs and other traditional paths to liquidity for private assets have become more challenging, GP-led secondary transactions have emerged as a powerful and popular tool across closed-end private funds, leading to explosive growth over the last five years. And while macro factors influence their prevalence year over year, these transactions remain broadly popular across the … Continue Reading

In Continuation of Longstanding Focus on Cybersecurity, SEC Proposes Significant Amendments to Regulation S-P

By Mark S. Audet, Ryan P. Blaney, Nolan Goldberg, Robert E. Plaze, Robert Pommer and Robert Sutton on April 5, 2023 Posted in Compliance, Cybersecurity, Enforcement, News, Regulation, SEC, Securities Law

On March 15, 2023 the U.S. Securities and Exchange Commission (“SEC”) released its proposal to amend Regulation S-P: Privacy of Consumer Financial Information and Safeguarding Customer Information, while simultaneously issuing two additional cybersecurity-related rule proposals[1] and re-opening the comment period for its previously-proposed cybersecurity risk management rule released in February 2022.[2] This set of sweeping reforms … Continue Reading

Conflicts of Interest: How High Will the Bar be Raised?

The SEC last month proposed rules under the Advisers Act indicating a dramatic shift in how the SEC intends to reduce conflicts of interest involving private fund managers and their investors. As we previously noted in the context of increased disclosure obligations, the SEC’s recent approach previews a sea change redefining the relationship between private … Continue Reading

SEC Division of Examinations Announces 2022 Examination Priorities

By Robert Leonard, Michael Mavrides, Robert E. Plaze, Robert Sutton and Jeffrey D. Greenhouse on April 8, 2022 Posted in Asset Management, Compliance, Enforcement, Examinations, Hedge Funds, Private Equity, Regulation, Securities Law

On March 30, 2022, the Division of Examinations of the U.S. Securities and Exchange Commission (the “SEC”) announced its examination priorities for fiscal year 2022. The annual publication of the Division’s examination priorities is intended to align with the Division’s four pillars of promoting and improving compliance, preventing fraud, monitoring risk, and informing policy, and … Continue Reading

SEC Chair Gensler Signals SEC Policies for Private Funds

By Robert E. Plaze and David J. Marcinkus on November 16, 2021 Posted in Enforcement, Hedge Funds, Private Equity, Regulation, SEC, Securities Law

On November 10, 2021, SEC Chair Gensler gave an important speech identifying his regulatory priorities for private funds. Registered advisers should take note of the areas of concern Chair Gensler identified as we approach the new year. Read the full client alert here.… Continue Reading

SEC Announces 2020 National Compliance Outreach Seminar for Investment Companies and Investment Advisers

By Anthony M. Drenzek, Robert E. Plaze, Samuel J. Waldon and Joshua M. Newville on October 29, 2020 Posted in Compliance, Hedge Funds, OCIE, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law, Venture Capital

On October 7th, 2020, the Securities and Exchange Commission (SEC) announced the rescheduled date of its 2020 national compliance outreach seminar for investment companies and investment advisers. This program is intended to help Chief Compliance Officers and other senior personnel at investment companies and investment advisory firms enhance their compliance programs. The SEC’s Office of … Continue Reading

Misuse of Private Fund Assets Leads to SEC Enforcement and Industry Bar for Fund Manager

By Julia M. Ansanelli, Joshua M. Newville and Samuel J. Waldon on May 21, 2020 Posted in Asset Management, Disputes, Private Equity Litigation, SEC, Securities Law

In a cautionary tale about the career-limiting risks of SEC sanctions, a private fund adviser and its owner were found to have misused over $1 million of fund assets, resulting in a bar from the investment industry as well as a civil penalty. Monsoon Capital, LLC (Monsoon) is an SEC-registered investment adviser founded and owned … Continue Reading

Who Foots the Bill? SEC Cracks Down on Operating Partner Reimbursement Disclosures

By Hena M. Vora, Joshua M. Newville, Samuel J. Waldon and Michael R. Hackett on May 7, 2020 Posted in Asset Management, Compliance, Disputes, Private Equity, Private Equity Litigation, SEC, Securities Law

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

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

U.S. Supreme Court Denies Bid to Review Dismissal of Challenge to Pay-To-Play Rule

By Adam L. Deming, Anthony M. Drenzek, Michael R. Hackett, Joshua M. Newville, Robert E. Plaze and Samuel J. Waldon on February 27, 2020 Posted in Disputes, FINRA, SEC

On January 13, 2020, the United States Supreme Court denied certiorari to an appeal of a June 2019 order from the United States Court of Appeals for the D.C. Circuit that dismissed an action seeking to invalidate certain under the First Amendment, among other arguments. This denial leaves in place a ruling in favor of … Continue Reading

SEC clamps down on Custody Rule

By Hena M. Vora, Joshua M. Newville, Samuel J. Waldon and Robert E. Plaze on December 11, 2019 Posted in Compliance, Examinations, Private Equity Litigation, Regulation, SEC

Under rule 206(4)-2 of the Advisers Act, otherwise known as the Custody Rule, it is a fraudulent practice for a registered investment adviser to have custody of client funds or securities, unless the adviser takes certain required steps to protect the assets. Over the past year the SEC’s Enforcement division has been relatively active investigating … 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 Enforcers Continue to Focus on Undisclosed Fees

By Joshua M. Newville and Brian A. Hooven on November 12, 2019 Posted in Compliance, OCIE, Regulation, SEC, Securities Law, Uncategorized

In a series of enforcement cases over the past few months, the SEC has continued to bring actions focused on undisclosed fees charged to clients. Many of these cases have charged firms with fraud and other violations based on fees that were not adequately disclosed. While some attention has focused on retail wealth managers, institutional … 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

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

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

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

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