Hedge and Private Equity Funds

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

FINRA issued an investor alert regarding the “unique characteristics and risks” presented by “alternative funds.”  See  http://op.bna.com/srlr.nsf/r?Open=rhil-98ktb8.

In a release, FINRA explained that “alt” mutual funds are United States Securities and Exchange Commission-registered and publicly offered, and hold “more non-traditional in-vestments and employ more complex trading strategies than traditional mutual funds.”  Alt funds, according

In its scrutiny of newly registered private fund advisers, the SEC Staff has observed two practices that might implicate broker-dealer registration requirements.

The first practice involves fund advisers that pay their personnel transaction-based compensation for selling interests in their funds or that have personnel whose primary purpose is selling interests in the funds. The second

The U.S. District Court for the District of New Jersey ruled that New Jersey fraud and misrepresentation claims by a venture capital firm over an unsuccessful investment in a telecom concern could proceed. See Edelson V LP v. Encore Networks Inc., D.N.J., Civ. No. 2:11-5802(KM), 5/9/13.  www.blomberglaw.com/public/document/EDELSON_V-LP-v_ENCORE -NETWORKS-INC-et_al_Docket_No_211cv05802_DNJ.

The plaintiff made an investment in a