Sep. 10, 2020

Key Legal and Structural Considerations for Asian Equity Investments

The favorable economic fundamentals of many growth-stage economies across the Asian region can provide tremendous investment opportunities for hedge funds and other investors. To generate good returns on a consistent basis, however, requires a deep understanding of the structural and legal issues that, in many cases, are unique to the countries in that region. For example, there is a greater tendency toward family control over listed and unlisted businesses in Asia in comparison to the U.S. or many European markets. In addition, the unique features of the legal and regulatory systems – which vary significantly across Asia – can, in some instances, either make or break investment returns. In a guest article, Akin Gump attorneys Matthew Puhar, Daniel Cohen, Steven Franklin and Sonia Lor examine several areas where knowing how best to navigate key legal and structural issues and opportunities in particular Asian jurisdictions can provide fund managers with a concrete investment edge and analyze various topical examples. For commentary from other Akin Gump attorneys, see “What Fund Managers Need to Know About the Legislative Response to #MeToo” (May 3, 2018).

AML Program Failures May Draw Scrutiny From Multiple Regulators

The SEC, CFTC and FINRA each announced that they had settled enforcement proceedings against a brokerage firm arising out of alleged deficiencies in the firm’s anti-money laundering (AML) compliance program and its failure to file suspicious activity reports when required to do so by the Bank Secrecy Act (BSA). Although investment advisers are not among the financial institutions subject to the BSA, the settlement orders provide valuable insight into how closely regulators scrutinize firms’ compliance policies and procedures – particularly with respect to AML – and their expectations that compliance programs be tailored to firms’ specific operations and risks. This article synthesizes the key facts from the SEC, CFTC and FINRA settlement orders, including the firm’s alleged violations and the sanctions imposed on it, with additional insights from an industry practitioner with expertise in AML compliance. See “Lessons Private Fund Managers Can Learn From U.S. Bancorp’s Settlement of AML Violations” (Apr. 26, 2018). See also our three-part series on tailoring a compliance program: “Why Fund Managers Should Customize” (Jul.  16,  2020); “What Fund Managers Should Consider” (Jul. 23, 2020); and “When Fund Managers Should Review and Update” (Jul. 30, 2020).

Operational Due Diligence and Fundraising Challenges During the Coronavirus Pandemic

Fund managers have faced heightened risks during the coronavirus pandemic, and allocators have encountered challenges when conducting due diligence – all of which have contributed to an overall difficult fundraising environment. These issues were explored during a recent GAIM Ops Digital program. Lisa Lewin, vice president of BNY Mellon Pershing, moderated the discussion, which featured David S. Bradley, chief operating officer and CCO of Hawk Ridge Capital Management; Mark Hannoush, managing director of the Ontario Teachers’ Pension Plan; Jason Hubschman, chief operating officer of Lyxor Asset Management; and Craig Toner, analyst at Albourne. This article outlines the speakers’ insights. For coverage of another recent GAIM Ops Digital program, see our two-part series “Present and Former SEC Leaders Discuss the SEC’s Approach to Exams and Enforcement During the Coronavirus Pandemic”: Part One (Jul. 16, 2020); and Part Two (Jul. 23, 2020).

OCIE Risk Alert Highlights Concerns Associated with Coronavirus Pandemic

The SEC’s Office of Compliance Inspections and Examinations (OCIE) has issued a risk alert (Alert) on compliance risks for investment advisers and broker-dealers associated with the coronavirus pandemic, including protection of investor assets; supervision; fees and expenses; fraud; business continuity; and protection of sensitive information. The Alert is an important reminder of advisers’ fundamental compliance duties, the specific compliance challenges that have arisen during the pandemic and where OCIE is focusing its attention. This article highlights the key provisions of the Alert. See our coverage of OCIE risk alerts on private fund managers; the transition from LIBOR; Regulation Best Interest and Form CRS; electronic messaging; the cash solicitation rule; best execution; fees and expenses; the advertising rule; compliance topics; custody; cybersecurity; business continuity and disaster recovery plans; and social media.

A Look at KPMG’s Evolving Asset Management Regulation Report: Fee and Expense Disclosure; Responsible Investing; and Market Access (Part  Two of  Two)

KPMG’s tenth edition of its Evolving Asset Management Regulation report (Report) surveys the current state of – and changes to – global regulations that affect asset managers. Subtitled “Supporting growth and ensuring care,” the Report states that “regulatory agendas have not changed, only relative priorities and perspectives.” It concludes that parties must “embrace the evolving new reality, including an increasingly digital society, changes to working practices, demands for sustainable finance and greater awareness of global interconnectedness.” This two-part series discusses the key takeaways from the Report, with additional insights from survey author Julie Patterson, KPMG head of asset management, regulatory change, financial services risk & regulatory insight center. This second article explores fee and expense disclosures; the end of the London Interbank Offered Rate; capital markets rules; responsible investing; new investment vehicles and broadening investor base; and market access issues. The first article covered the report’s findings on the impact of the pandemic on regulation; liquidity risk, valuation and leverage; operational resiliency; anti-money laundering; and the fiduciary duty. For coverage of other KPMG reports, see “AIFMD’s Efficacy Five Years After Implementation” (May 30, 2019); and “Key Developments in Hedge Fund Regulation in the Americas, the Asia-Pacific Region, Europe, South Africa and the Middle East” (Sep. 4, 2014).