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Tag Archives: Investment Adviser

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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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

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

By Anthony M. Drenzek on Posted in Compliance, OCIE, Private Equity Litigation, Regulation, SEC, Securities Law
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

By Timothy W. Mungovan, Joshua M. Newville, Michael R. Hackett, Anthony M. Drenzek, William D. Dalsen, Alexandra V. Bargoot, Brian A. Hooven and Lucy C. Wolf on Posted in Business Development Companies, Compliance, Disputes, Examinations, Hedge Funds, Mergers & Acquisitions, Private Credit, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law, Venture Capital
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

Proskauer Private Investment Funds Group Releases Annual Review and Outlook

By Anthony M. Drenzek and Michael R. Hackett on Posted in Compliance, Hedge Funds, OCIE, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law, Venture Capital
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

U.S. House Bill Aims to Curtail SEC Staff’s Ability to Obtain Algorithmic Trading Source Code

By Christopher Wells, Robert Leonard, Michael Mavrides, Joshua M. Newville, Anthony M. Drenzek and Lucy C. Wolf on Posted in Compliance, Hedge Funds, OCIE, Private Equity Litigation, Regulation, SEC, Securities Law
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

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

By Joshua M. Newville, Timothy W. Mungovan and Anthony M. Drenzek on Posted in Compliance, Disputes, OCIE, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law, Venture Capital
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
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