The days of private fund advisers filing Form PF on a quarterly or annual basis only are over. As of December 11, 2023, when certain amendments to Form PF (Amendments) took effect, large hedge fund advisers are now required to file so-called “current” reports on Form PF no later than 72 hours after designated events occur. As a result, hedge fund managers must now monitor for the occurrence of such events, determine whether a reporting obligation has been triggered and, if so, ensure that a Form PF current report is filed by this very short deadline. Each step of the process poses its own challenges. This first article in a two-part series discusses the challenges hedge fund managers face in monitoring for current events and the approaches managers have taken for this task. The second article will examine how managers are determining whether a Form PF reporting obligation has arisen and ensuring that a complete and accurate current report is filed in a timely manner, if required. See our two-part series on the Amendments: “Enhanced Reporting for Large Hedge Fund Advisers” (Jun. 22, 2023); and “Compliance Challenges and Implications” (Jul. 6, 2023). Read full article …

In November 2023, the U.K.’s Financial Conduct Authority (FCA) released policy statement PS23/16 on Sustainability Disclosure Requirements (SDR) and investment labels. The rules cover a new “anti-greenwashing” rule; a voluntary labeling regime for products with a sustainability objective as part of their investment objective; product disclosure requirements; sustainability entity reporting; retail investor-specific requirements on naming and marketing; and consumer-facing product-level disclosures. This guest article by Goodwin Procter attorneys Ajay Pathak, Andrew Henderson, Danielle Reyes and Chris Ormond discusses the key elements set out in PS23/16; examines how those rules compare and contrast with the SEC’s proposed rules on environmental, social and governance investment practices and fund names, as well as the E.U.’s sustainable finance legislation; and concludes with practical action points for fund managers in scope (both now and in anticipation of the future expansion of the U.K. regime to overseas funds marketed in the U.K. and to portfolio management). See “New FCA Consultation: the U.K. Version of the E.U.’s SFDR?” (Jan. 5, 2023). Read full article …

Practice makes perfect. That is the philosophy of Erich Kron, security advocate at KnowBe4, as well as one of the main takeaways of the 2023 Edition of the KnowBe4 Phishing by Industry Benchmarking Report (Report), of which Kron served as one of the authors. Regardless of location, industry or size, consistent and frequent security awareness training paid off, resulting in employees who demonstrated lower vulnerability to, and greater awareness of, social engineering scams. The Report provides key metrics on the industries most vulnerable to phishing attacks, outlines global challenges and provides some key takeaways to help organizations reduce their employees’ susceptibility to social engineering scams. This article highlights key practical takeaways from the Report, as well as color on these concepts from Kron based on his previous experience working as a security practitioner for the Department of Defense, and in the healthcare and large manufacturing industries. See our two-part series on phishing messages: “As Email Scams Surge, Training Lessons From 115 Million Phishing Messages” (May 12, 2022); and “How to Measure Whether Your Company Is Ready to Catch Lots of Phish” (May 19, 2022). Read full article …

Although the SEC has been laser-focused on how advisers and broker-dealers manage and capture so-called “off channel” communications, firms should not expect a pass from the agency on other violations of SEC recordkeeping requirements – even when the problem is due to vendor error. The SEC charged J.P. Morgan Securities LLC (JPMorgan), which is registered with the SEC as both a broker-dealer and an investment adviser, with violating recordkeeping requirements after it inadvertently deleted millions of archived emails. The proceeding marks the third time the SEC has penalized JPMorgan over its handling of electronic communications. It is also an important reminder that firms remain ultimately responsible for the conduct of their vendors. This article details the circumstances giving rise to the proceeding and the terms of the settlement. See “SEC Penalizes Nine Advisers for Marketing Rule Violations in Ongoing Sweep” (Nov. 9, 2023); “SEC Remains Focused on Off-Channel Communications” (May 11, 2023); and “SEC and CFTC Penalize Broker-Dealers $1.8 Billion for Electronic Communications Recordkeeping Violations” (Oct. 27, 2022). Read full article …

The SEC, CFTC and IRS all treat digital assets differently, creating considerable uncertainty for fund managers that invest in them. The SEC views many, if not most, tokens as securities, while the CFTC views certain tokens as commodities. The IRS, which has issued limited guidance on the tax treatment of digital asset transactions, treats virtual currencies as “property” and does not consider tokens to be “securities” for purposes of certain sections of the Internal Revenue Code. A Strafford seminar examined the uncertain tax treatment of many common types of tokens, transactions and structures within the digital asset ecosystem, including trading, mining/staking, liquidity pools, lending, stablecoins and investments in digital asset startups, as well as the potential tax treatment of common fund activities involving digital assets. The program featured Mark E. Mullin, counsel at Shartsis Friese LLP; Jonathan (Jon) Van Loo, partner at Scale LLP; and Yu Ting Wang, shareholder at Yu‑Ting Wang, P.C. This article distills their insights. See “Recent Regulatory and Market Developments Affecting Digital Asset Funds and Digital Securities” (Jul. 22, 2021). Read full article …