Investment Fund Law Blog

InvestmentFundLawBlog

Updates and Insights on Legal Issues Facing Fund Managers and Investors

Category Archives: Private Funds

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HEDGE FUND ADVISER, TWO EXECUTIVES AND OUTSIDE AUDITOR CHARGED FOR IMPROPER EXPENSE ALLOCATIONS AND MISLEADING FINANCIAL STATEMENTS

Posted in Advisory, Investment Advisers, Private Funds
The expense provisions of many private fund governing documents are becoming longer and more detailed for good reason – increased Securities and Exchange Commission (SEC) scrutiny and prosecution relating to expense allocation and disclosure. On April 29th, the SEC announced charges against Alpha Titans LLC, a hedge fund advisory firm, its principal, Timothy P. McCormack… Continue Reading

INVESTMENT ADVISER CONFLICTS OF INTEREST – BlackRock Censured; Compliance Officer Personally Liable

Posted in Advisory, Investment Advisers, Private Funds
On April 20, 2015, the Securities and Exchange Commission (“SEC”) issued an order against an investment advisory firm and its former chief compliance officer, for violating Sections 206(2) and 206(4) and rule 206(4)-7 of the Investment Advisers Act and rule 38a-1 of the Investment Company Act. The SEC charged BlackRock Advisors LLC with breaching its… Continue Reading

DOL Issues Proposal on ERISA Fiduciaries

Posted in Advisory, Investment Advisers, Private Funds
On April 14, 2015, the Department of Labor issued its much anticipated re-proposal of regulations defining and expanding the persons who are treated as ERISA fiduciaries.  Under the proposal, subject to certain exceptions, all persons who  provide investment advice or recommendations for a fee to an employer-sponsored  retirement plan, plan fiduciary, plan participant, IRA or… Continue Reading

Reminder: Required annual Form ADV amendment by March 31, 2015

Posted in Advisory, Investment Advisers, Private Funds
We want to remind you of your firm’s annual investment adviser registration amendment (Form ADV annual amendment) which must be filed on the IARD system on or before March 31, 2015.  This deadline applies to all SEC and State registered advisers as well as Exempt Reporting Advisers (ERAs) with a December 31, 2014 fiscal year… Continue Reading

2015 SEC Examination Priorities

Posted in Broker-Dealers, Investment Advisers, Private Equity, Private Funds
The SEC’s Office of Compliance Inspections and Examinations (“OCIE”) recently released its Examination Priorities for 2015.  The priorities represent certain practices and products that OCIE believes present a potentially higher risk to investors and/or the integrity of the US capital markets.  In 2015, OCIE’s priorities focus on issues involving investment advisers, broker-dealers and transfer agents… Continue Reading

2015 Annual Compliance for Registered Firms

Posted in Advisory, Client Alert, Investment Advisers, Private Equity, Private Funds
Annual Compliance Obligations—What You Need To Know As the new year is upon us, there are some important annual compliance obligations Investment Advisers either registered with the Securities and Exchange Commission (the “SEC”) or with a particular state (“Investment Adviser”) and Commodity Pool Operators (“CPOs”) or Commodity Trading Advisors (“CTAs”) registered with the Commodity Futures… Continue Reading

Client Alert: The Second Circuit Raises the Bar for Insider Trading Convictions

Posted in Advisory, Broker-Dealers, China Funds, Investment Advisers, Private Equity, Private Funds, Registered Investment Companies, Uncategorized
By William M. Sullivan, Jr. and Jay B. Gould Under the Second Circuit’s new ruling, prosecutors have two large hurdles they must clear to convict under securities laws. First, they must prove that a defendant knew that the source of inside information disclosed tips in exchange for a personal benefit. Second, the definition of “personal… Continue Reading

CFTC Enters Consent Order for Permanent Injunction Against AlphaMetrix Group

Posted in Investment Advisers, Private Funds, Registered Investment Companies
The U.S. Commodity Futures Trading Commission (CFTC) announced that on December 16, 2014, the U.S. District Court for the Northern District of Illinois entered a Consent Order for permanent injunction against AlphaMetrix, LLC (AlphaMetrix), a Chicago-based Commodity Pool Operator (CPO) and Commodity Trading Advisor (CTA), and its parent company AlphaMetrix Group, LLC (AlphaMetrix Group). The… Continue Reading

What Will happen to the Hedge Fund Industry if we Experience a 2008 Type Market Decline?

Posted in Guest Post, Private Funds
With interest rates and credit spreads near historic lows and equity valuation above historical averages, many people are concerned that the Federal Reserve, by artificially keeping rates low, has created a 2007 type asset bubble in the capital markets where many securities are priced to perfection. What happens to the financial markets when the Fed… Continue Reading

Servicing Clients Across Borders Carries Special Risks

Posted in Advisory, Broker-Dealers, Investment Advisers, Private Funds
On November 25, 2014, the Securities and Exchange Commission (the “SEC”) brought charges against a Swiss-based bank that should serve as notice to all non-U.S. banks that maintain relationships with clients who have moved to the U.S., as well as U.S.-based banks that provide services to clients who have relocated to other countries.  The SEC… Continue Reading

SEC Brings Custody Rule Enforcement

Posted in Advisory, Investment Advisers, Private Funds
On October 29, 2014, the Securities and Exchange Commission (“SEC”) announced an administrative enforcement action against an investment advisory firm and three top officials for violating rule 206(4)-2 under the Investment Advisers Act of 1940 (“Advisers Act”), the “custody rule,” that requires firms to follow certain procedures when they control or have (or are deemed… Continue Reading

CFTC Exemptive Relief Harmonizes Regulations 4.7(b) and 4.13(a)(3) with Rule 506(c) of Reg. D and Rule 144A

Posted in Advisory, Investment Advisers, Private Funds
In a press release yesterday, the CFTC issued an exemptive letter, CFTC Letter No. 14-116, providing relief from certain provisions of CFTC Regulations 4.7(b) and 4.13(a)(3) that restrict marketing to the public.  The exemptive relief was issued to make CFTC Regulations 4.7(b) and 4.13(a)(3) consistent with SEC Rule 506(c) of Reg. D and Rule 144A,… Continue Reading

Size Doesn’t Matter: Insider Trading Charges for $11k Profit

Posted in Investment Advisers, Private Funds
The Securities and Exchange Commission (the “SEC”) charged Kevin McGrath, a partner at a New York investor relations firm with insider trading.  According to the SEC complaint, McGrath allegedly received confidential information from clients in order to prepare press releases.  The SEC discovered McGrath used non-public information from two different clients to buy or sell… Continue Reading

Private Fund Managers as Broker-Dealers and How to Avoid It

Posted in Broker-Dealers, Investment Advisers, Private Funds
Private equity firms were put on notice last year that they may be subject to registration as broker dealers when David Blass, head of the Division of Markets and Trading at the Securities and Exchange Commission (“SEC”), provided his insights at an industry conference.  Since that time, the SEC has published their examination priorities list,… Continue Reading

New Custody Compliance Tasks for California Registered Advisers Effective April 1

Posted in Advisory, Client Alert, Investment Advisers, Private Funds
Written by: Ildiko Duckor The California Commissioner of Business Oversight (“Commissioner”) recently amended California’s custody rule 10 C.C.R. Section 260.237 (the “New Custody Rule”).  The New Custody Rule will be effective on April 1, 2014. All investment advisers licensed or required to be licensed in California must comply with the New Custody Rule.  California Exempt… Continue Reading

The CFTC and Japan’s FSA Sign Cross-Border Agreement

Posted in Investment Advisers, Private Funds
On March 10, 2014, the U.S. Commodity Futures Trading Commission and the Financial Services Agency of Japan signed a Memorandum of Cooperation which expresses the agencies’ intent to work together to supervise and oversee regulated entities that operate on a cross-border basis in Japan and the United States.  The agencies intend to cooperate in the… Continue Reading

The CFTC and Japan’s FSA Sign Cross-Border Agreement

Posted in Investment Advisers, Private Funds
Written by:  Jessica M. Brown and Michael G. Wu On March 10, 2014, the U.S. Commodity Futures Trading Commission and the Financial Services Agency of Japan signed a Memorandum of Cooperation which expresses the agencies’ intent to work together to supervise and oversee regulated entities that operate on a cross-border basis in Japan and the… Continue Reading

SEC Risk Alert: Selecting Alternative Investments and Their Managers

Posted in Investment Advisers, Private Funds
Written by:  Jay B. Gould and Jessica M. Brown The Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations released a “Risk Alert” on January 28, 2014, which focuses on the due diligence investment advisers perform in alternative investments[1] and managers for their clients. After observing an increasing trend in advisers recommending alternative investments… Continue Reading

Reminder- March 3rd Deadline for Annual CFTC Exemption Affirmation

Posted in Client Alert, Investment Advisers, Private Funds
The annual affirmation process started on December 3, 2013. Advisers who relied on an exemption or exclusion from CPO registration under CFTC Regulation 4.5, 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), 4.13(a)(5) or an exemption from CTA registration under 4.14(a)(8) and filed a notice with the NFA must affirm the exemption or exclusion annually within 60 days after the… Continue Reading

California’s New LLC Law: Next Steps for California LLCs

Posted in Advisory, Guest Post, Investment Advisers, Private Funds
If your management company or fund was formed as a California limited liability company, you need to review your Operating Agreement to determine whether amendments need to be made. On January 1, 2014, California’s Beverly-Killea Limited Liability Company Act (Old Act) was superseded by the California Revised Uniform Limited Liability Company Act (New Act). The… Continue Reading

The Volcker Rule–A Suggested Approach for Banking Entities When Analyzing its Impact on Business Models, Activities and Transactions

Posted in Advisory, Guest Post, Private Funds
Written by:  Joseph T. Lynyak, III and Anthony H. Schouten More than three years following the passage of the Dodd-Frank Act, and intense inter-agency negotiations, the federal financial regulatory agencies collectively adopted the final version of the “Volcker Rule,” or “Rule”—which imposes new and potentially severe limitations on domestic and foreign banking entities’ activities in… Continue Reading

Amended TIC Form B – Information for U.S. Investment Advisers

Posted in Investment Advisers, Private Funds
Written by: Jessica M. Brown As a result of recent amendments made by the U.S. Department of Treasury to the Treasury International Capital Form B (“Form B”), private funds and investment advisers may be required to file Form B.  Form B requires a fund manager or investment adviser to report certain information concerning “claims” and… Continue Reading

2014 Examination Priorities Published by the SEC

Posted in Broker-Dealers, Investment Advisers, Private Equity, Private Funds
Today, the Securities and Exchange Commission published its 2014 priorities for its National Examination Program (“NEP”).  These priorities cover a wide range of issues at financial institutions, including investment advisers and investment companies, broker-dealers, clearing agencies, exchanges and other self-regulatory organizations, hedge funds, private equity funds, and transfer agents.  Similar to the 2013 priorities, the… Continue Reading

ANNUAL COMPLIANCE OBLIGATIONS–WHAT YOU NEED TO KNOW

Posted in Advisory, Client Alert, Investment Advisers, Private Funds
As the new year is upon us, there are some important annual compliance obligations Investment Advisers either registered with the Securities and Exchange Commission (the “SEC”) or with a particular state (“Investment Adviser”) and Commodity Pool Operators (“CPOs”) or Commodity Trading Advisors (“CTAs”) registered with the Commodity Futures Trading Commission (the “CFTC”) should be aware… Continue Reading