House Passes Proposed Legislation Defining Insider Trading
Latest from The Capital Commitment
SEC clamps down on Custody Rule
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 and enforcing the rule – which, at most, requires a showing of negligence – with a number of complicated provisions…
First Circuit Reverses District Court’s “Partnership-in-Fact” Holding and Finds Private Equity Funds Not Part of Controlled Group and Not Liable for Portfolio Company’s Pension Liabilities
Proskauer Private Investment Funds Group Releases 2019 Annual Review and Outlook
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.…
SEC Enforcers Continue to Focus on Undisclosed Fees
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 advisers to private funds have attracted scrutiny for undisclosed fees, leading to the following enforcement actions:
In August of 2019,…
SEC Releases FY 2019 Enforcement Results: Increases in Investment Adviser Actions and Maintained Focus on Individual Accountability
SEC Announces the Formation of Asset Management Advisory Committee
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.…
To Disclose or Not to Disclose: Navigating the Complex Relationship Between Voluntary Self-Disclosure of Sanctions Violations and Enforcement Response
In the ever-evolving and complex world of economic sanctions, voluntary self-disclosure is frequently the best long-term strategy for any company that discovers a violation of a sanctions regime. The more difficult task is to assess the costs and benefits of self-disclosure in cases where the conduct falls into a gray area. We explain the complex relationship between voluntary self-disclosure and the Office of Foreign Assets Control’s enforcement response in a chapter recently published in the…
New York Establishes Six-Year Statute of Limitation for Prosecution of Claims under the Martin Act
On August 25, 2019, New York Governor Andrew Cuomo signed New York State Senate Bill S6536 which established a six-year statute of limitations for the prosecution of certain crimes related to fraudulent practices in respect to stocks, bonds and other securities and conducting business in the State of New York. As discussed below, the legislation overturned a New York Court of Appeals ruling last year holding that claims under the Martin Act were subject to…
Fund Sponsor’s Fee Calculation Mistake Leads to SEC Enforcement
A settlement last week involving a private equity fund sponsor is a reminder that compliance with fee calculation provisions and valuation policies and procedures are crucially important for fund managers. Even when an error is the result of simple negligence, the SEC will take enforcement action when fee calculations do not strictly comply with the governing documents, especially where investments are overvalued. …