Jul. 23, 2020

Tailoring a Compliance Program: What Fund Managers Should Consider (Part Two of Three)

Fund managers are not just required to have compliance programs; the so-called “compliance rule” – Rule 206(4)‑7 under the Investment Advisers Act of 1940 (Advisers Act) – requires them to have written policies and procedures that are “reasonably designed” to prevent violations of the Advisers Act and the SEC’s rules. The SEC has stressed that, to fulfill that requirement, managers must tailor their compliance programs to their specific businesses. Thus, relying on off-the-shelf compliance programs and manuals that do not address a manager’s individual risks, processes and operations is not sufficient to satisfy the compliance rule. Tailoring a compliance program appropriately, however, can be a challenging task that involves consideration of various factors. This three-part series delves into the logistics of tailoring a fund manager’s compliance program. This second article lays out what fund managers should consider when tailoring their programs, including the role of an off-the-shelf compliance program. The first article outlined the expectations of the SEC, DOJ and investors as to the customization of compliance programs, as well as the consequences of failing to tailor the program. The third article will identify five triggers for a review – and possible update – of a manager’s compliance program. See “Will Inadequate Policies and Procedures Be the Next Major Focus for SEC Enforcement Actions?” (Nov. 30, 2017); and “Four Essential Elements of a Workable and Effective Hedge Fund Compliance Program” (Aug. 28, 2014).

Compliance Corner Q3‑2020: Regulatory Filings and Other Considerations That Hedge Fund Managers Should Note in the Coming Quarter

Fund managers have faced numerous operational and business continuity challenges associated with the coronavirus pandemic. Over the past three months, however, while the coronavirus pandemic continues, many fund managers are beginning to emerge from a pinpoint focus on responding to the “new normal” and instead are allocating greater resources to planning for the future to ensure regulatory needs and initiatives continue to be met. This thirteenth installment of the Hedge Fund Law Report’s quarterly compliance update, authored by consultants Anne Wallace and Chris Ray of ACA Compliance Group (ACA), highlights upcoming filing deadlines and reporting requirements of which fund managers should be aware during the third quarter. This article also includes information fund managers should consider for reopening their offices; the imminent global transition from the LIBOR benchmark; and the recently published Office of Compliance Inspections and Examination risk alert on advisers managing private funds. For more from ACA, see “Regulatory Responses to Coronavirus Pandemic and Best Practices for Business Continuity and Compliance” (Apr. 16, 2020).

Portfolio Manager’s Gender Discrimination and Breach of Contract Claims Survive Dismissal of Retaliation Claim

In early 2018, distressed debt specialist Sara Tirschwell filed a civil complaint against TCW Group Inc. (TCW Group); TCW LLC (TCW); TCW Group’s president and CEO David Lippman; and TCW Group managing director Jess Ravich in New York State Supreme Court, New York County (Court). Tirschwell, who is seeking more than $30 million in damages, claimed that Ravich, her former boss, coerced her into a sexual relationship while she was developing a distressed debt fund for TCW and that TCW fired her in retaliation for reporting his alleged misconduct. The Court recently issued a decision and order granting partial summary judgment to the defendants; dismissing three of Tirschwell’s five claims – including her retaliation claim; and holding that the remaining claims can proceed to trial. This article details the relevant evidence presented by the litigants and the Court’s reasoning. For discussion of the complaint, see “Portfolio Manager Accuses Former Employer and Supervisor of Retaliation for Reporting Sexual Harassment” (Feb. 15, 2018). See also “HFLR Program Looks at Recent Developments and Trends in Employment Law Relevant to Fund Managers” (Jul. 26, 2018).

Present and Former SEC Leaders Discuss the SEC’s Approach to Exams and Enforcement During the Coronavirus Pandemic (Part Two of Two)

In a recent program sponsored by GAIM Ops Digital and presented by Promontory Financial Group (Promontory), present and former SEC leaders provided an insider’s perspective on how the SEC’s Office of Compliance Inspections and Examinations (OCIE) and its Division of Enforcement (Enforcement) are adapting and operating during the ongoing coronavirus pandemic. Jane Jarcho, senior adviser at Promontory and former Deputy Director of OCIE, moderated the discussion, which featured Kristin Snyder, Co‑Deputy Director of OCIE, Co‑National Associate Director of the Investment Adviser/Investment Company Examination Program and Associate Regional Director of the San Francisco Examination Program; C. Dabney O’Riordan, Co‑Chief of Enforcement’s Asset Management Unit; and Sarah Curran, director at Promontory who held a variety of positions in OCIE over a 14-year span. This second article in a two-part series distilling the panelists’ insights covers enforcement initiatives and pandemic-related enforcement risks. The first article focused on key risk areas for private fund advisers, areas of focus on examinations and best practices for CCOs. GAIM Ops will present panels at its upcoming conference taking place in Cayman and online from September 29 – October 2, 2020, where the above topics and others will be explored in greater detail. For additional information about the program, click here. To register for the conference, click here, using the promotional code available in this article for a 10‑percent discount. For additional insights from Promontory staff, see our two-part interview with a former OCIE private funds examiner: “Potential SEC Response to Fund Manager Efforts During the Coronavirus Pandemic” (May 7, 2020); and “Compliance Issues Introduced by the Coronavirus Pandemic and Mitigation Tips” (May 14, 2020).

Majority of In-House Counsel Satisfied With Compensation, but Gender Gap Remains, Survey Finds

Executive search firm BarkerGilmore recently conducted a study of the compensation received by more than 1,900 in-house counsel in 2019. Among BarkerGilmore’s notable findings are that year-over-year total compensation grew modestly, the majority of in-house attorneys are satisfied with their compensation and a significant gender pay gap still exists, especially at the GC level. This article summarizes the survey’s key findings, with emphasis on findings relevant to the financial services industry, and provides additional insights from BarkerGilmore. For more from the firm, see “BarkerGilmore Survey Benchmarks Compliance Personnel Compensation by Company Type, Revenue, Gender, Education and Industry” (Aug. 29, 2019). For additional surveys on hedge fund personnel compensation, see our coverage of HedgeFundCompensationReport.com’s 2015 Report and 2013 Report.