Jun. 18, 2020

How to Facilitate a Privacy Compliant Return to Work: Relevant Laws and Guidance (Part One of Three)

Private fund managers are designing strategies to gradually return employees to the workplace after the initial remote arrangements driven by the coronavirus pandemic. Most strategies will involve the collection and use of employee information to protect the workforce from the spread of the coronavirus and will therefore require the consideration of privacy issues. This three-part series addresses how to facilitate a privacy compliant return to work. This first article examines the relevant laws and guidance; ways fund managers can balance competing interests of safety and privacy; and anticipated U.S. regulatory considerations. The second article will provide practical steps to implement an infection response plan, including policies and protocols for identifying and responding to symptomatic or sick employees, as well as insights from practitioners in various organizations about the steps they are taking. The third article will focus on contact tracing and considerations for deciding if, and in what form, it is appropriate for a fund manager. See “How Fund Managers Can Withstand the Coronavirus Pandemic: Marketing Disruptions, Key Person Clauses and Cybersecurity Concerns (Part Two of Three)” (Apr. 9, 2020).

Navigating Prime Brokerage Agreements, Swaps and Repos During the Coronavirus Crisis (Part One of Two)

Hedge funds rely on prime brokers, swap dealers and other counterparties to meet their long- and short-term financing needs. Trading agreements with those counterparties are therefore common. The coronavirus pandemic has caused extensive disruption and volatility in the financial markets and put significant downward pressure on asset values – all of which may affect a fund manager’s obligations, rights and remedies under its trading agreements. Two timely recent programs delved into the issues that fund managers may face in times of financial stress under counterparty agreements, including margin calls, defaults, termination events, force majeure, valuation issues, exercise of remedies, bankruptcy and prime broker lockups. The programs also offered guidance on preparing for and managing those issues. The first program featured K&L Gates partners Barry B. Cosgrave, Kenneth Holston, Brian D. Koosed and Anthony R.G. Nolan, along with counsel Robert T. Honeywell. The second, sponsored by Women in Funds and Kleinberg Kaplan, featured Kleinberg Kaplan partners Jared R. Gianatasio and Mary Kuan. This two-part series distills the key takeaways from the two presentations. This first article discusses counterparty trading relationships generally during the coronavirus pandemic, as well as a specific look at how to navigate relations with prime brokers. The second article explains how to navigate crisis events under swap and repo agreements. See “Steps Fund Managers Should Take Now to Ensure Their Trading of Swap, Repo and Securities Lending Transactions Continues Uninterrupted After January 1, 2019” (Oct. 18, 2018).

Avoiding Parallel Fund Conflicts: Common Challenges for Hedge Fund and Credit Strategies (Part Two of Two)

Each asset class in the private funds industry faces different risks related to parallel funds and conflicts of interest. Hedge funds, for example, are more likely than other asset classes to have parallel funds with similar investment strategies, based on the common decision to raise separate funds that take advantage of different exemptions from SEC registration requirements under the Investment Company Act of 1940. A recent case study published by the Standards Board for Alternative Investments (SBAI) addresses the conflicts of interest when managing parallel funds. This second article in a two-part series describes common scenarios in which conflicts of interest may arise between parallel funds and near-parallel funds in hedge funds and credit funds. The first article summarized the SBAI’s recently released standards and its suggestions for mitigating conflicts of interest while operating parallel funds, including how to determine when two funds are sufficiently “similar” for that purpose. See our two-part series on direct lending funds: “Structural Approaches to Address Liquidity Considerations and Ensure Regulatory Compliance” (May 28, 2020); and “Five Structures to Mitigate Tax Burdens for Various Investor Types” (Jun. 4, 2020).

Navigating PPP, TALF and Fundraising During the Coronavirus Crisis

U.S. agencies are taking extraordinary measures to contain the damage caused by the ongoing coronavirus pandemic. A recent program presented by Troutman Sanders and Pepper Hamilton analyzed the benefits and burdens of two of those measures. The speakers also explored potential issues that managers might face when attempting to raise funds during the crisis. The program discussed the Small Business Administration’s Paycheck Protection Program and the Federal Reserve’s Term Asset-Backed Securities Loan Facility, as well as potential compliance issues for advisers. The program featured Troutman Sanders partner Genna N. Garver and Pepper Hamilton partner Gregory J. Nowak. This article discusses the key takeaways from the program. For further recent joint insights from Troutman Sanders and Pepper Hamilton, see “The Dos and Don’ts of Investor Calls That Investment Managers Must Consider” (May 7, 2020).

ALFI Seminar: Navigating Changing E.U. Distribution, Marketing and AML Rules (Part Two of Two)

A recent seminar by the Association of the Luxembourg Fund Industry (ALFI) featured panel discussions on multiple topics with representatives from financial services, asset management, legal and accounting firms. ALFI deputy general director Marc‑André Bechet hosted the seminar. This second article in our two-part series reviews the discussions on marketing E.U. funds outside the E.U.; implementation of the Sustainable Finance Disclosure Regulation; the “digitalization” of financial services in the E.U.; and developments in Luxembourg’s and the E.U.’s anti-money laundering and counter-terrorism financing efforts. The first article covered the discussions on the impact of the coronavirus pandemic on Luxembourg’s funds industry; E.U. liquidity risk management measures; E.U. distribution challenges for U.S. fund managers; the E.U.’s incipient pre-marketing regime; AIFMD II; and European Long-Term Investment Funds. For commentary from Bechet, see “ALFI Director and Chairwoman Examine Brexit, E.U. Pre‑Marketing Rules, Trends in Distribution and ESG” (Jan. 23, 2020).