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”).[1] Seven months since the compliance date, SEC-registered investment advisers continue to discover and adapt to challenges in applying the Marketing Rule. Newly formed advisers also face significant
The Trend Continues: Increased Regulatory Focus on Privacy & Cybersecurity for Private Funds
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 cybersecurity laws.
In January 2023, the New York Department of Financial Services (DFS) announced sanctions against Coinbase, finding “significant failings in the company’s compliance program.”
Regulators’ Increased Focus on GP-Led Secondaries and Continuation Funds
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 growth over the last five years. And while macro factors influence their prevalence year over year, these transactions remain broadly popular across the
Energy Transition: A New Risk Climate for Investors
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 continue to raise funds focused on investments in this sector, we see no reason for this trend to
Ripples Following the SPAC Wave: Litigation and Regulatory Risks
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 the SPAC wave will continue to unfold this year, generating increased regulatory attention and a growing number of
Messaging Missteps: SEC’s Increasing Focus on Off-Channel Communications
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 on text messages from personal phones, personal email, WhatsApp and other platforms not typically captured or monitored by advisers. The sweep is causing
SEC Overreach:Insurers Underwrite?
The SEC spent 2022 making multiple and sweeping proposals to amend rules under the Advisers Act, many of which have the ability to significantly re-shape market standards for private funds. Here, we focus on the SEC’s proposal to undo a common protection for private fund advisers – the ability to rely, as against the
Shining a Light on the Corporate Transparency Act: FinCEN’s Rules for Beneficial Ownership Reporting
On January 1, 2021, Congress enacted the Corporate Transparency Act (the “CTA”) as part of the Anti-Money Laundering Act of 2020 in the National Defense Authorization Act for Fiscal Year 2021. Congress passed the CTA to “better enable critical national security, intelligence, and law enforcement efforts to counter money laundering, the financing of terrorism, and other illicit activity.” The CTA requires a range of entities, primarily smaller, otherwise unregulated companies, to file a report with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) identifying the entities’ beneficial owners—the persons who ultimately own or control the company—and provide similar identifying information about the persons who formed the entity. The CTA also authorizes FinCEN to disclose this information to authorized government authorities and to financial institutions in certain circumstances.
SEC Issues New Guidance Regarding Russia Sanctions and Public Company Disclosures
In response to Russian President Vladimir Putin’s decision to invade Ukraine in February, the U.S. government announced sweeping sanctions against Russia. As the conflict nears the three-month mark, businesses around the world are continuing to address compliance with these sanctions. To that end, the SEC recently issued guidance on how companies affected by the Russian
The Corporate Transparency Act – Government KYC
Summary of the Corporate Transparency Act under the National Defense Authorization Act for Fiscal Year 2021
On January 1, 2021, the Corporate Transparency Act (the “CTA”), which is part of the National Defense Authorization Act for Fiscal Year 2021, became effective after both houses of Congress overrode a presidential veto. The CTA amends the Bank Secrecy Act (the “BSA”) and, once the Treasury Department’s reporting procedures and standards are established, it will require many companies, which have historically been unregulated, to file a report with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) identifying the companies’ beneficial owners. In an attempt to ban anonymous shell companies and “better enable critical national security, intelligence, and law enforcement efforts to counter money laundering, the financing of terrorism, and other illicit activity,” government authorities will, for the first time, have access to a database of such beneficial ownership information.