Jul. 9, 2020

How to Facilitate a Privacy Compliant Return to Work: Contact Tracing and Fund Manager Considerations (Part Three of Three)

Fund managers and other organizations are evaluating whether they can safely bring employees back to the workplace after the recent coronavirus-related shutdowns, and some are considering a form of contact tracing to track the potential spread and contact points for employee illness and exposure. This third article in our three-part series focuses on contact tracing, including challenges and considerations for rolling out the technology; addresses how to ensure an overall return to work plan is effective; and outlines the effect of privacy issues on hedge fund managers. The first article examined 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 detailed how fund managers could facilitate a privacy compliant return to work; provided practical advice from various in-house and outside privacy counsel on protocols for identifying and responding to symptomatic or sick employees; and included six considerations to assist fund managers with developing a privacy compliant policy. For more on contact tracing, see “The Current State and Future of AI Regulation” (May 14, 2020).

How Advisers Can Prepare for OCIE Exams on the Transition From LIBOR

As of the end of 2021, the U.K. Financial Conduct Authority will no longer compel the panel of banks that contribute the submissions from which the London Interbank Offered Rate (LIBOR) is determined to make those submissions, and the already fragile benchmark will further degrade until it is no longer usable. There is also a possibility that even before the end of 2021, LIBOR could be deemed “non-representative” and thus unusable by many market participants. The transition away from LIBOR potentially affects hundreds of trillions of dollars in notional transactions that extend past the end of 2021. In its 2020 Examination Priorities, the SEC’s Office of Compliance Inspections and Examinations (OCIE) stated its intent to track the impact of the industry’s transition away from LIBOR, and in June 2020, OCIE published a risk alert (Risk Alert) announcing that “OCIE intends to engage with registrants through examinations to assess their preparations for the expected discontinuation of LIBOR and the transition to an alternative reference rate.” In a guest article, Anne E. Beaumont, partner at Friedman Kaplan Seller & Adelman, explores the significance of this Risk Alert for investment managers that expect or are preparing for SEC examinations in the months to come. For more from Beaumont on the LIBOR transition, see “The SEC Weighs In on LIBOR Transition” (Aug. 8, 2019); and “How Hedge Fund Managers Can Prepare for the Anticipated ‘End’ of LIBOR” (Aug. 24, 2017).

Recidivism Can Result in Severe SEC Sanctions for Fund Managers

In 2019, a defendant was accused by the SEC of improperly registering a purported investment adviser that had no assets under management and making material misrepresentations to prospective investors. While that defendant was settling those allegations with the SEC, he apparently was at it again, forming a new adviser and a new fund, as well as making new misrepresentations to prospective investors. Early in 2020, the SEC commenced another action against the defendant and the new adviser, seeking to enforce the 2019 settlement order (2019 Order) and asserting that the defendant and adviser had engaged in new fraudulent conduct. Although the defendant’s egregious conduct, if true, was clearly fraudulent, the action highlights the SEC’s strong stance against recidivist behavior. This article reviews the 2019 Order; the SEC’s recent complaint; and the terms of the final judgments. For an example of another recidivist investment adviser, see “Repeat Custody Rule Offenders Face Severe SEC Sanctions” (Dec. 10, 2015).

Morrison & Foerster GC Studies Gauge Outlook for Economic Reopening

In March 2020, Morrison & Foerster surveyed 110 GCs of global organizations ‑ a significant number of them from the financial sector ‑ and published a study on how they were responding to the coronavirus pandemic. Morrison & Foerster recently conducted a follow-up study (Current Report) to learn how GCs are preparing for the ongoing easing of stay-at-home orders. Morrison & Foerster’s findings in the Current Report show that, although many businesses are still in “crisis mode,” GCs are generally more optimistic about their abilities to navigate the pandemic, but certain of their priorities have changed over the past few months. This article analyzes Morrison & Foerster’s findings in both reports, which may assist fund manager GCs with setting their own priorities accordingly. See our two-part series covering a recent HFLR webinar: “Manager and Regulator Flexibility During Coronavirus Pandemic” (May 7, 2002); and “Business Issues Arising From Coronavirus Pandemic” (May 21, 2020).

ESG Considerations for Fund Managers: E.U. and Global Developments (Part Two of Two)

Although there is increasing demand for investments that take into account environmental, social and governance (ESG) factors, ESG investing poses certain challenges for fund managers. A recent Dechert program examined the most pressing issues facing fund managers that are interested in pursuing ESG strategies. The program featured partners Julien Bourgeois; Andrew L. Oringer; Mark D. Perlow; Mikhaelle Schiappacasse; and Anthony S. Kelly, former Co‑Chief of the Asset Management Unit of the SEC Division of Enforcement. This second article in a two-part series covers E.U and global ESG developments, including E.U. and global leadership; disclosure, taxonomy and low-carbon benchmarks regulations; and other E.U. initiatives. The first article discussed the key insights from the program on ESG in the U.S. regulatory landscape, including issues unique to ERISA fiduciaries, private funds, managed accounts and registered funds; SEC examination and enforcement focus; and strategies for ensuring compliance when embracing ESG. See “Survey Identifies Drivers and Obstacles for Sustainable Investing” (Apr. 2, 2020); and “Preparing for the Impact Revolution: How Fund Managers Can Implement the Philosophy of ‘Doing Well by Doing Good’” (Mar. 21, 2019).