Proskauer on Private Fund Litigation

Tag Archives: Valuation

Valuation in Times of Market Disruption

Valuation practices will continue to be the subject of disputes. Particularly in times of economic disruption and market volatility, buyers and sellers are more likely to have substantial differences of opinions on valuation, which often lead to the use of earn-outs and resulting post-closing disputes. Use of a cost basis for recently acquired assets may … Continue Reading

Top Ten Regulatory and Litigation Risks for Private Funds in 2021

By Margaret A. Dale, Michael R. Hackett, Kirsten E. Lapham, William Komaroff, Timothy W. Mungovan, Dorothy Murray, Joshua M. Newville, Todd J. Ohlms, Seetha Ramachandran, Ana Vermal, Samuel J. Waldon, Jonathan M. Weiss, Anthony M. Drenzek, James Anderson, Alexandra V. Bargoot, William D. Dalsen, Adam L. Deming, David W. Heck, Hena M. Vora and Lucy C. Wolf on March 18, 2021 Posted in Asset Management, Compliance, Cybersecurity, Disputes, Enforcement, Examinations, Hedge Funds, Mergers & Acquisitions, OCIE, Private Credit, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law, White Collar

The regulatory and litigation risks for private funds are greater than at any time since the financial crisis in 2008. Just a few examples prove the point: the pandemic (which caused extraordinary volatility in revenues and valuations for most asset categories); a new administration in Washington D.C. (with a more muscular regulatory agenda); continued proliferation … 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

Proskauer Partner Joshua Newville Discusses the SEC’s Focus on Valuation of Private Fund Investments

By Joshua M. Newville on September 11, 2020 Posted in Asset Management, Compliance, Examinations, OCIE, Private Equity, SEC

Proskauer partner Josh Newville discussed the SEC’s focus on valuation of private fund investments at the recent Securities Enforcement Forum West 2020. The global COVID-19 crisis has added a layer of complexity to the valuation process, requiring special care. As we predicted in our 2020 Top Ten Regulatory and Litigation Risks for Private Funds, ongoing … Continue Reading

Five Principles For Accurate and Reliable Portfolio Company Valuations

By Joshua M. Newville and James Anderson on September 1, 2020 Posted in Compliance, Examinations, Private Equity, SEC, Securities Law

We have seen the SEC increase its focus on valuation of privately-held portfolio companies recently. The SEC’s increased focus is in line with our prediction made in the Top Ten Regulatory and Litigation Risks for Private Funds in 2020 post from the start of this year, and we expect the trend to continue. The global … Continue Reading

Ten Tips for Navigating Risks and Liability at Portfolio Companies During COVID-19

By Timothy W. Mungovan, Michael R. Hackett, Jonathan M. Weiss, Alexandra V. Bargoot and Adam L. Deming on August 24, 2020 Posted in Asset Management, Compliance, Private Equity, Private Equity Litigation, Regulation

Many portfolio companies continue to confront business disruptions as a result of the COVID-19 pandemic. Even prior to the pandemic, we were seeing an uptick in litigation claims against sponsors and funds arising out of portfolio companies. The liquidity challenges since March have increased those risks at some companies. For sponsors, many of these risks … Continue Reading

SEC Releases Risk Alert Identifying Common Private Equity and Hedge Fund Compliance Deficiencies

By Anthony M. Drenzek, Robert Leonard, Robert E. Plaze, Michael Suppappola and Samuel J. Waldon on July 1, 2020 Posted in Compliance, Hedge Funds, OCIE, Private Equity, SEC, Securities Law

On June 23rd, the staff of the U.S. Securities and Exchange Commission’s Office of Compliance Inspections and Examinations issued a new risk alert entitled “Observations from Examinations of Investment Advisers Managing Private Funds.” As discussed in the client alert below, the report highlights many practices which have been the subject of SEC enforcement actions with … Continue Reading

SEC Targets Fund Auditor in Latest Battle Over Valuation Practices

By Adam L. Deming, Joshua M. Newville and Samuel J. Waldon on April 9, 2020 Posted in Private Equity, Regulation, SEC, Securities Law

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 … Continue Reading

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

Top Ten Regulatory and Litigation Risks for Private Funds in 2020

By Margaret A. Dale, Michael R. Hackett, Kirsten E. Lapham, Timothy W. Mungovan, Joshua M. Newville, Seetha Ramachandran, Samuel J. Waldon, Jonathan M. Weiss, Anthony M. Drenzek, James Anderson, Alexandra V. Bargoot, William D. Dalsen, Adam L. Deming, David W. Heck, Brian A. Hooven, Christina H. Kroll, Hena M. Vora and Lucy C. Wolf on February 18, 2020 Posted in Business Development Companies, Compliance, Disputes, Examinations, Hedge Funds, Mergers & Acquisitions, OCIE, Private Credit, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law, Venture Capital, White Collar

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

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

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

SEC Fines Fund Manager $5 Million Over Undervaluation of Assets

By Joshua M. Newville and Brian A. Hooven on June 25, 2019 Posted in Compliance, Disputes, Hedge Funds, Regulation, SEC, Securities Law

A recent action where the SEC focused on the presumably conservative undervaluation of assets suggests that it is more than willing to use valuation as a hook to deter “smoothing” of returns. As we previously noted, while the SEC consistently announces that valuation is a “key area of focus,” it is uncommon for regulators to … Continue Reading

The Top Ten Regulatory and Litigation Risks for Private Funds in 2019

By Timothy W. Mungovan, Samuel J. Waldon, Joshua M. Newville, Michael R. Hackett, Anthony M. Drenzek, William D. Dalsen, Brian A. Hooven, Alexandra V. Bargoot, Lucy C. Wolf and Hena M. Vora on February 20, 2019 Posted in Compliance, Disputes, Examinations, Hedge Funds, Mergers & Acquisitions, OCIE, Private Credit, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law, Uncategorized, Venture Capital

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

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

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 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

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 February 12, 2018 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 November 29, 2017 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

SEC Releases FY 2017 Enforcement Results: Maintaining Focus on Individual Accountability and Investment Advisers

By Joshua M. Newville, Michael R. Hackett, Anthony M. Drenzek and Alexandra V. Bargoot on November 16, 2017 Posted in Compliance, Hedge Funds, Private Equity, Private Equity Litigation, Regulation, SEC, Securities Law

Last night, the SEC announced its enforcement results for the Fiscal Year 2017, accompanied by a report from the Co-Directors of its Division of Enforcement. While the total number of actions was down slightly from 2016, the percentage of those cases involving investment advisers or investment companies – 18% – remained consistent, and amounted to … Continue Reading

SEC Flags the Top Six Advertising Rule Deficiencies for Investment Advisers

By Stephen T. Mears, Robert E. Plaze, Christopher Wells, Anthony M. Drenzek, Joshua M. Newville and Michael R. Hackett on September 25, 2017 Posted in Compliance, OCIE, Regulation, SEC, Securities Law

The SEC staff recently published an alert highlighting the most common deficiencies seen in investment advisers’ marketing materials. Based on its recent examinations and initiatives, the Office of Compliance Inspections and Examinations (OCIE) issued its risk alert to highlight compliance issues relating to Rule 206(4)-1 (the “Advertising Rule”). Here are the top six: Misleading Performance … Continue Reading

Snap Judgment: Unicorns Under Pressure and Addressing Risks of Private Lawsuits

By Joshua M. Newville, William D. Dalsen and Alexandra V. Bargoot on September 18, 2017 Posted in Disputes, Hedge Funds, Mergers & Acquisitions, Private Equity, Private Equity Litigation, SEC, Venture Capital

The recent IPOs of Snap, Inc. and Blue Apron indicate that while the IPO pipeline continues to flow, there may be a cautionary tale for “unicorns” – venture-backed companies with estimated valuations in excess of $1 billion. After Snap went public in March, it posted a $2.2 billion loss in its first quarter, yielding a … 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 June 20, 2017 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

Reported Criminal Probes Regarding Bond Valuations Highlight the Importance of Valuation Procedures

By Joshua M. Newville, Robert E. Plaze and Anthony M. Drenzek on May 17, 2017 Posted in Compliance, Disputes, Examinations, Hedge Funds, Private Equity, Regulation, SEC, Securities Law

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 … Continue Reading

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