Hope for a resurgence during 2024 in Venture Capital fundraising, investment, and returns was strong at the beginning of this year, with optimism fueled by the recovery in 2023 of U.S. stock markets (lead by the performance...more
4/30/2024
/ Anti-Money Laundering ,
Corporate Transparency Act ,
Exempt Reporting Advisers (ERAs) ,
FinCEN ,
Initial Public Offering (IPO) ,
Investment ,
Investors ,
Private Equity Funds ,
Regulatory Agenda ,
Securities and Exchange Commission (SEC) ,
Stock Markets ,
Terrorist Financing Regulations ,
Venture Capital
Big fund-raising rounds and high valuations have some wondering whether the AI sector is in a bubble in the nature of the dotcom boom. As of this writing, OpenAI is valued at over $80 billion; Amazon added another $2.75...more
The SEC’s new and proposed rules on cybersecurity and cyber-incident reporting will have a dual impact on private investment advisers and funds.
First, the proposal by the SEC will impose cybersecurity related...more
4/18/2024
/ Cyber Incident Reporting ,
Cybersecurity ,
Data Collection ,
Enforcement ,
Governance Standards ,
Investment Adviser ,
New Rules ,
Policies and Procedures ,
Recordkeeping Requirements ,
Regulatory Agenda ,
Risk Management ,
Securities and Exchange Commission (SEC) ,
Technology Sector
In its final Private Fund Adviser Rules adopted last year, the SEC dropped one of the more controversial proposed rules—the proposal to prohibit contractual exculpation or indemnification provisions that would shield or...more
4/16/2024
/ Anti-Fraud Provisions ,
Compliance ,
Enforcement ,
Fiduciary Duty ,
Indemnification ,
Investment Adviser ,
Investment Advisers Act of 1940 ,
Negligence ,
Private Funds ,
Releases ,
Securities and Exchange Commission (SEC)
Adviser-led secondary transactions have seen explosive growth over the last five years. That growth has brought increased regulatory concerns over the conflicts of interests inherent in these transactions and a perceived...more
2023’s excitement for generative artificial intelligence (AI) prompted the SEC to respond on multiple fronts – stump speeches, rulemaking, new exam priorities and sweeps and previewing potential enforcement actions. SEC Chair...more
ESG continues to be a hot topic for 2024 for investors and regulators alike. The specific concerns investors and regulators have – and what they expect to develop over the coming months – differ, however, across...more
4/1/2024
/ Breach of Duty ,
Disclosure Requirements ,
Enforcement ,
Environmental Social & Governance (ESG) ,
EU ,
Fiduciary Duty ,
Financial Statements ,
Form 10-K ,
Greenhouse Gas Emissions ,
Greenwashing ,
Investors ,
Jurisdiction ,
Proposed Rules ,
Regulation S-K ,
Regulation S-X ,
Regulatory Agenda ,
Sustainability ,
UK
Economic headwinds and the interest rate environment that developed over the course of 2023 increased financial stress on portfolio companies and portend heightened litigation risk in 2024 for portfolio companies and their...more
In a wave of SEC rulemaking this past year, representing a “new world order” event akin to Dodd-Frank, the SEC has provided itself with a fresh set of tools to increase regulatory and enforcement scrutiny on private funds....more
3/26/2024
/ Conflicts of Interest ,
Corporate Counsel ,
Cybersecurity ,
Enforcement ,
Environmental Social & Governance (ESG) ,
New Amendments ,
New Rules ,
Portfolio Companies ,
Private Equity ,
Regulatory Agenda ,
Securities and Exchange Commission (SEC)
To understand the litigation and regulatory risks that are coming in 2024 for private capital, it is helpful to look back briefly on recent events. Arguably, the single most important event over the last 18 months was the...more
3/19/2024
/ Acquisitions ,
Asset Management ,
Cryptocurrency ,
Cybersecurity ,
Dispute Resolution ,
Enforcement Actions ,
Fund Managers ,
Hedge Funds ,
Interest Rates ,
Investment Management ,
Investors ,
Mergers ,
Private Equity ,
Private Funds ,
Regulatory Agenda ,
Regulatory Reform ,
Regulatory Requirements ,
Securities and Exchange Commission (SEC) ,
Securities Regulation ,
Technology Sector
The SEC’s recent enforcement settlement involving a fund manager highlights the SEC’s focus on an investor’s “control purpose” triggering the requirement to file on a Schedule 13D as opposed to a short-form 13G. At issue was...more
3/8/2024
/ Enforcement ,
Fund Managers ,
Hedge Funds ,
Investors ,
Passive Investments ,
Private Equity Firms ,
Schedule 13D ,
Schedule 13G ,
Securities and Exchange Commission (SEC) ,
Securities Litigation ,
Settlement ,
Swap Agreements
On November 14, 2023, the SEC’s Division of Enforcement announced its Enforcement Results for Fiscal Year 2023. Below are some key takeaways for fund managers:
The Commission brought 760 total enforcement actions in FY...more
11/21/2023
/ Broker-Dealer ,
Civil Monetary Penalty ,
Disgorgement ,
Enforcement ,
Enforcement Actions ,
Environmental Social & Governance (ESG) ,
Investment Adviser ,
Investment Companies ,
Noncompliance ,
Private Funds ,
Rulemaking Process ,
Securities and Exchange Commission (SEC) ,
Settlement ,
Whistleblower Awards ,
Whistleblowers
Since 2015, the SEC has brought nearly two dozen enforcement actions for violations of the whistleblower protection rules under Rule 21F-17(a) against employers for actions taken to impede reporting to the SEC. The bulk of...more
10/19/2023
/ Carve Out Provisions ,
Compliance ,
Confidentiality Agreements ,
Enforcement Actions ,
Financial Industry Regulatory Authority (FINRA) ,
Penalties ,
Risk Mitigation ,
Securities and Exchange Commission (SEC) ,
Separation Agreement ,
Settlement Agreements ,
Whistleblower Protection Policies ,
Whistleblowers
On August 24, 2023, the Second Circuit Court of Appeals issued its much-anticipated decision in Kirschner v. JP Morgan Chase Bank, holding that the syndicate term loans at issue were not securities. As noted in our earlier...more
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...more
The SEC suffered a significant loss last week in its ongoing legal battle with Ripple over the XRP digital token. While the District Court held that Ripple’s initial sales of XRP to institutional investors constituted the...more
7/18/2023
/ Blockchain ,
Crypto Exchanges ,
Digital Assets ,
FinTech ,
Hedge Funds ,
Howey ,
Interlocutory Appeals ,
Investors ,
Securities Act of 1933 ,
Securities and Exchange Commission (SEC) ,
Unregistered Securities
The gloves are off. The SEC’s recent enforcement actions against leading crypto exchanges suggest that the SEC has decided that time’s up for the crypto industry as it currently exists in the United States....more
6/15/2023
/ Broker-Dealer ,
Clearing Agencies ,
Coinbase ,
Crypto Exchanges ,
Cryptocurrency ,
Enforcement Actions ,
Howey ,
Infrastructure ,
Popular ,
Securities ,
Securities Act of 1933 ,
Securities and Exchange Commission (SEC) ,
Simple Agreement for Future Tokens (SAFT)
On November 4, 2022, compliance with amended Rule 206(4)-1 (the “Marketing Rule”) became mandatory for all investment advisers registered with the Securities and Exchange Commission (the “SEC”). Seven months since the...more
As we reported here, on May 5, 2023, the SEC issued an award of $279 million to a whistleblower. This is the largest award the SEC has issued to an individual whistleblower in the history of the SEC Office of the...more
Recent enforcement actions highlight the increased regulatory scrutiny that private funds may face with respect to internal cybersecurity protocols and responses to cyber-crimes and cyber incidents under new and updated...more
5/23/2023
/ Coinbase ,
Compliance ,
Cyber Crimes ,
Cybersecurity ,
Enforcement Actions ,
Investment Advisers Act of 1940 ,
Investment Company Act of 1940 ,
New Legislation ,
Popular ,
Privacy Laws ,
Private Funds ,
Robinhood Financial ,
Sanctions ,
Securities and Exchange Commission (SEC)
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...more
Go to any private equity event in the last 12 months, and “energy transition” will have been discussed, meaning the shift in energy production away from fossil‑based systems to low or zero carbon ones. As fund managers...more
5/10/2023
/ Climate Change ,
Energy Sector ,
Enforcement ,
Environmental Social & Governance (ESG) ,
Investment ,
Investors ,
Liquidity ,
Risk Alert ,
Securities and Exchange Commission (SEC) ,
SFDR ,
Taxonomy
It’s a pattern we often see in boom-and-bust cycles—disputes rising in the period after a wave crests. SPAC deal volume hit an unprecedented high in 2021, but then slowed down in 2022 alongside IPOs. However, the fallout from...more
The SEC’s Enforcement Division is conducting a sweep investigation of large investment advisers regarding their employees’ use of “off-channel” communications. The sweep, which has been widely reported in the press, focuses...more
4/25/2023
/ Asset Management ,
Breach of Duty ,
Compliance ,
Enforcement Actions ,
Fiduciary Duty ,
Investigations ,
Investment Adviser ,
Investment Advisers Act of 1940 ,
Private Funds ,
Recordkeeping Requirements ,
Securities and Exchange Commission (SEC)
Implications of SEC attempt to curb indemnification for private fund managers -
The SEC spent 2022 making multiple and sweeping proposals to amend rules under the Advisers Act, many of which have the ability to...more