Despite the SEC’s offering only a scant 30‑day period for the public to comment on its proposed amendments to Form PF (Proposal), concerned citizens and members of the private funds industry managed to submit 127 comment letters to advise the Commission’s next steps. With an eye toward educating the SEC on the nuances of the industry and tailoring the scope of the reforms, many letters were critical of different facets of the Proposal. To understand the impact of the Proposal and forecast potential changes when the SEC issues its final reforms, the Hedge Fund Law Report reviewed all the comment letters to analyze common complaints and concerns raised therein. This two-part series presents key takeaways from the comment letters submitted on the Proposal in anticipation of final Form PF reforms in the coming months. This first article summarizes general observations in the comment letters about the scope, intent and purpose of the Proposal, as well as the scope of the definition of hedge funds. The second article will detail critiques of the one business day reporting requirement and the stress-related reporting events in the new Section 5 of Form PF that would trigger such reporting. See our two-part series on the Proposal: “Require Prompt Reporting of Certain Stress Events and Enhanced Reporting by Large Liquidity Fund Advisers” (Mar. 3, 2022); and “Practical Impact on Fund Managers and Reasons for Industry Backlash” (Mar. 10, 2022). Read full article …

Since 2020, the number and sophistication of ransomware attacks have spiked, largely perpetuated by organized criminal groups in Russia and Eastern Europe. Against that backdrop lies the U.S. government’s position on economic sanctions implemented by the U.S. Treasury Department’s the Office of Foreign Assets Control (OFAC) – which have escalated since Russia’s attack on Ukraine – prohibiting U.S. persons from making payments directly or indirectly to any individual, entity, group or country that is the target of such sanctions. In a guest article, Greenberg Traurig shareholders Jena Valdetero, Kara Bombach and Kyle Freeny discuss today’s most prevalent types of ransomware attacks; considerations for whether to make the ransom payment; FinCEN and OFAC’s ransomware guidance; and the U.S. government’s mitigation efforts. For more on sanctions basics, see our three-part series: “How Sanctions Regimes Work” (Jun. 16, 2022); “Their Impact on Private Fund Investors and Investments” (Jun. 23, 2022); and “How to Comply With Them” (Jul. 7, 2022). Read full article …

Seed investors commit much-needed capital to emerging managers in exchange for favorable economic and other investment terms. They may also serve as a seal of approval that helps attract other investors. Seward & Kissel recently released the results of its eighth annual seeding study, which covered the evolving nature of seed deals, including growing alignment between the interests of seeders and managers; increasing use of seed money for working capital support; revenue shares, tail rights and other seed deal economics; lockup terms; buyouts; and common non-financial terms. This article highlights the key findings, with additional thoughts from Seward & Kissel partner C. Gerhard (Gary) Anderson, III. See our two-part coverage of a prior Seward & Kissel seeding study: “Structuring the Seeder’s Interest, Key Person Covenants and Lock-Ups” (Oct. 12, 2017); and “Consent Rights, Indemnification and Manager Buyout Rights” (Oct. 19, 2017). Read full article …

The SEC has been increasingly concerned about the significant role that private funds play in the financial system and the associated risks that they may pose. The private fund adviser and cyber risk management rules proposed by the SEC are intended to address some of those concerns. A recent EisnerAmper program examined the key provisions of those rules and the steps advisers should be taking to prepare for their adoption, including the roles of the CCO, chief financial officer and technology officers. The program featured EisnerAmper partners Louis Bruno and Jeffrey Stomski; EisnerAmper director Raymond Soriano; and Dechert partner Michael L. Sherman. This article synthesizes their key points. See “Private Funds Top the SEC’s 2022 Exam Priorities” (Jun. 9, 2022); and “SEC Risk Alert Reflects Growing Concerns About and Focus on Private Funds” (Feb. 24, 2022). Read full article …

After five recent regulatory actions, companies face rising pressure to build a full-bodied compliance program for employment decisions driven by artificial intelligence (AI). This series on the latest AI rules examines organizations’ new responsibilities and obligations, and it details steps to address them. This third article shares AI oversight benchmarks from a new survey on corporate AI governance and provides insights on five compliance steps from the survey and the new rules. The first article analyzed a novel New York City law mandating bias audits for automated hiring and promotion algorithms. The second article discussed standards issued by Illinois, Maryland and California; the EEOC; and the DOJ, which last month settled with Meta and required it to discard discriminatory algorithms used to place ads. See “IOSCO Issues Final Guidance on AI and Machine Learning” (Oct. 7, 2021). Read full article …