Apr. 18, 2019

How Fund Managers Can Stay Ahead of the Digital Currency Curve

While some institutional investors have begun to warm to the idea of investing in digital currencies, they too encounter obstacles when seeking to invest in this asset class. In an effort to understand how hedge fund managers are approaching the digital currency market, the Hedge Fund Law Report recently interviewed Michael Sonnenshein, managing director at Grayscale Investments (Grayscale), an asset management firm focused exclusively on digital currency investing. In his role, Sonnenshein oversees the day-to-day business of Grayscale and has direct responsibility for the organization’s sales, operations and marketing. This article discusses distinct ways investors can gain exposure to digital currencies; the evolution of the asset class; and Sonnenshein’s observations regarding the increased interest by institutional investors – including hedge fund managers – in investing in digital currencies. See “Best Practices for Funds That Invest in Digital Assets” (Feb. 21, 2019); and “Opportunities and Challenges Posed by Three Asset Classes on the Frontier of Alternative Investing: Blockchain, Cannabis and Litigation Finance” (Dec. 14, 2017).

How Hackers Can Infiltrate Fund Managers Through Executives, and How to Stop Them

Hackers continually evolve their attack methodologies to penetrate corporate networks. They have found, for instance, that targeting key executives is an efficient way to gain entry. When executives are on work devices or corporate networks, they are protected from cyber attacks by their companies’ cybersecurity teams. When off network (e.g., at home or on personal devices), however, many lack even the most basic controls and protections. Why penetrate a $10-million system of firewalls, intrusion detection/prevention systems, privileged access management systems and behavior-based anti-malware controls when a hacker can target a $100 home router or computer with no security enabled? In a guest article, BlackCloak founder and CEO Dr. Chris Pierson explains how the home is the next battlefield in the war on financial institutions; defense companies; family offices; hedge funds; and other centers of wealth and influence. He explores the cyber-crime landscape, describes how hackers can infiltrate asset managers through their executives and suggests controls to mitigate those risks. See “Beware of False Friends: A Hedge Fund Manager’s Guide to Social Engineering Fraud” (Mar. 8, 2018).

Marketing to Public Pension Plans: Municipal Advisors; Pay to Play Laws; and Gift and Entertainment Rules (Part One of Two)

In addition to the requirements applicable to marketing in general, investment advisers face a significant additional layer of federal, state and local requirements when marketing their funds to public pension plans. A recent seminar presented by the Regulatory Compliance Association (RCA) offered a comprehensive overview of the rules pertaining to marketing to public pension plans and featured David Y. Dickstein, partner at Katten and an RCA Senior Fellow from Practice. This article, the first in a two-part series, discusses municipal advisor registration; political contributions; and gifts and entertainment. The second article will examine honest services fraud; use of solicitors and placement agents; lobbyist registration; and disclosure, recordkeeping and other requirements applicable to doing business with public plans. For additional insight from Dickstein, see “Katten Forum Identifies Best Practices for Hedge Fund Managers Regarding Best Execution, Soft Dollars, Principal Trades, Agency Cross Trades, Cross Trades and Trade Errors” (Mar. 13, 2014). On May 8, 2019, the RCA will host its Enforcement, Compliance & Operations Symposium in New York City. For additional information or to register for the symposium, click here.

How Fund Managers May Deploy Opportunity Zone Funds to Defer and Partially Eliminate Capital Gains

Tax-advantaged “Opportunity Zones” (OZs) were established by the 2017 Tax Cuts and Jobs Act (Tax Act). In accordance with the new OZ statute and proposed regulations, investors may be able to defer – and partially eliminate – recognition of gains by investing the proceeds of appreciated investments in a so-called “qualified opportunity fund” that invests in OZs. A recent Akin Gump program provided a comprehensive overview of the new OZ regime. The program was moderated by Akin Gump partner Lucas F. Torres and featured partners Susan H. Lent, John J. Marciano III and Ron G. Nardini, as well as senior adviser Geoffrey K. Verhoff. This article summarizes the key takeaways from the program. For additional commentary from Akin Gump attorneys, see “What Fund Managers Need to Know About the Legislative Response to #MeToo” (May 3, 2018); and our two-part series “Managing the Machine”: How Hedge Fund Managers Can Examine and Document Their Automated Trading Strategies (Jan. 7, 2016); and How Hedge Fund Managers Can Monitor and Review Their Automated Trading Strategies (Jan. 14, 2016).

Former SEC and FINRA Official and Assistant U.S. Attorney Joins Greenberg Traurig in Dallas

Greenberg Traurig announced that Robert Long has joined the firm’s Dallas office as a shareholder in its investigations and white collar defense practice. Long’s experience at the SEC and FINRA, as well as his time spent as a federal prosecutor, allows him to counsel clients on matters relating to financial services litigation; federal regulatory and administrative law; and white collar defense and special investigations. For another recent hire by the firm, see “Greenberg Traurig Expands Corporate and Investment Funds Practice With Addition of Peter L. Tsirigotis” (Nov. 8, 2018).