Hedge and Private Equity Funds

Join our colleagues, Jon Heyl and Alex Kerzhner, in what is sure to be an important review of the challenges facing the PE/HF industry during the pandemic.   The webinar will take place on Thursday, June 4, 2020 at 2 p.m. (EDT)/ 11 a.m. (PDT).

Please register (or click) at this site:  https://foxrothschild2.webex.com/mw3300/mywebex/default.do?nomenu=true&siteurl=foxrothschild2&service=6&rnd=0.520498216233004&main_url=https%3A%2F%2Ffoxrothschild2.webex.com%2Fec3300%2Feventcenter%2Fevent%2FeventAction.do%3FtheAction%3Ddetail%26%26%26EMK%3D4832534b00000004a042107c2af537d531b2ac872f843c41108c4da97db0231303c011bd8277765f%26siteurl%3Dfoxrothschild2%26confViewID%3D161131266161257810%26encryptTicket%3DSDJTSwAAAASqE0ZuyzNd7jcvQfkqx3mqfGmPjA6SK9Z5v54tVs7LwQ2%26


In 2 separate actions, the SEC came down very hard on private equity/hedge funds regarding both disclosure and operational issues.  See https://www.sec.gov/enforce/ia-5478-s; and  https://www.sec.gov/enforce/ia-5485-s.

In the first action, a firm settled for $1 million because it allegedly mischaracterized its prior investments in its marketing materials.  This purported misrepresentation led to an over-statement of the fund’s

The SEC recently brought and settled an action against a former wannabe fund manager, who lied to prospective investors that he already had raised millions of dollars in the fund from other (fictitious) investors.  The fund manager was barred from the securities industry for 10 years.  See  https://www.sec.gov/litigation/litreleases/2020/lr24783.htm.

The SEC also claimed that the fund

The SEC’s Division of Investment Management issued updated guidance regarding the definition of “knowledgeable employees” under Rule 3c-5 of the Investment Company Act of 1940.  See Managed Funds Ass’n, SEC No-Action Letter, avail. 2/6/14, https://www.managedfunds.org/wp-content/uploads/2014/02/Staff-Response-to-MFA-3c-5-Letter-Final-Outgoing-2-6-14-no-sigs.pdf

The SEC staff explained that “private funds” include private equity funds, hedge funds, and other pooled investment vehicles, excluded from

The SEC’s Division of Investment Management said it will not object if an investment adviser pays a cash fee for the solicitation of advisory clients, although a federal district court injunctive order precluded it.  RBS Sec. Inc., SEC No-Action Letter, avail. 11/26/13, http://www.sec.gov/divisions/investment/noaction/2013/rbssecurities-11252013-section 206.htm.

In granting relief, the staff noted especially that the firm

The SEC’s push to conduct narrowly focused examinations of newly registered investment advisers is ahead of schedule and providing it with insights about compliance weaknesses, hedge fund advisers, and private equity companies.

To date, the SEC has completed 210 presence exams while 42 are currently open.  Exam teams are focused on compliance associated with marketing

Tis the season for the regulators to announce their examination priorities.  No less than the SEC’s Office of Compliance Inspections and Examinations released its 2014 Examination Priorities for its National Examination Program (“NEP”).

In particular, the SEC identified several new issues for registered investment advisers, primarily for those RIAs, who are at least three years

Now that 2014 is here, it is a good idea to understand what the Enforcement Division might focus on this year.  In a recent article that appeared in the BNA, David Marder, a partner with Robins, Kaplan, Miller & Ciresi identified fifteen things to expect in the coming year. 

The fifteen things he noted to

Former shareholders may pursue narrowed claims against some large private equity firms who allegedly conspired with one another minimizing competition for target companies.  See Dahl v. Bain Capital Partners LLC, D. Mass., 07-12388, 3/13/13), http://www.bloomberglaw.com/public/document/Klein_et_a_v_Bain_Capital_Partners_LLC_et_at_Docket_No_107cv1238.

The plaintiffs previously held shares in various public companies that were, ultimately, acquired by private equity firms.  The complaint