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    Oct. 22, 2020

Advice for Allocating Legal Tasks Between In‑House Attorneys, Outside Counsel, Consultants and Other Vendors (Part Three of Three)

Fund managers rely on outside counsel for a surprisingly broad swath of legal needs, ranging from basic fund formation work to navigating the ever-changing information privacy landscape. Although GCs of fund managers could theoretically have all work performed by a single law firm, that is rarely the most cost-efficient approach. Instead, GCs need to retain a stable of legal experts and allocate work among them to achieve the best cross-section of expertise and cost effectiveness. To aid GCs in their efforts, the Hedge Fund Law Report surveyed the best practices of several attorneys with experience working at law firms and fund managers. This final article in a three-part series identifies situations in which a fund manager should pay a premium for legal services, along with others where lower-cost alternatives (e.g., compliance consultants) can be used. The second article detailed criteria for selecting outside counsel, and the first article explored ways to reduce legal costs and outside counsel fees. For more on structuring a firm’s internal legal and compliance efforts, see “Benefits, Challenges and Recommendations for Persons Simultaneously Serving As General Counsel and Chief Compliance Officer of a Hedge Fund Manager” (May 10, 2012).

Compliance Corner Q4‑2020: Regulatory Filings and Other Considerations That Hedge Fund Managers Should Note in the Coming Quarter

Hedge fund managers seem to have adapted to the new remote working environment caused by the coronavirus pandemic, although many are contemplating some form of a return to their offices. While managers are deciding whether and how to have their employees resume working in their offices, they should not forget the upcoming filing deadlines for the final quarter of 2020. This fourteenth installment of the Hedge Fund Law Report’s quarterly compliance update, written by consultants Joey Martinez, Chris Ray and Anne Wallace of ACA Compliance Group (ACA), highlights upcoming filing deadlines and reporting requirements that fund managers should be aware of during the third quarter. This article also includes information about proposed amendments to update Form 13F; recent OCIE risk alerts on credential compromise and coronavirus pandemic-related risks and challenges; a global regulatory update on environmental, social and governance investing; CFTC amendments to a regulation regarding exemptions from CPO registration; and an update on European short selling reporting requirements. For more from ACA, see our two-part series on ACA’s compliance testing survey: “Hot Topics, Compliance Programs, BCPs and the Pandemic” (Aug. 13, 2020); and “Form CRS; Anti‑Bribery and Anticorruption Controls; Cybersecurity; and Privacy” (Aug. 27, 2020).

ALFI Panel Examines the E.U. Alternative Investing Landscape

A virtual panel discussion at the recent Association of the Luxembourg Fund Industry (ALFI) Rentrée program offered perspectives from E.U. funds industry professionals on the current state of the market for alternative investment funds in Europe, exploring allocation preferences, trends in fund structures, the impact of the ongoing coronavirus pandemic, the continuing spread of responsible investing and the success of the Alternative Investment Fund Managers Directive. Robert White, partner at EY, moderated the discussion, which featured Paul Bashir, CEO of Harrison Street Europe; Markus Benzler, global head multi-manager private equity at UBS; Peter Veldman, head of fund management at EQT; and Jérôme Wigny, partner at Elvinger Hoss Prussen. This article outlines the speakers’ key insights. For coverage of another recent program from ALFI, see our two-part series “Navigating Changing E.U. Distribution, Marketing and AML Rules”: Part One (Jun. 11, 2020); and Part Two (Jun. 18, 2020).

SEC Cites Investment Adviser for Beneficial Ownership Reporting Failures

Registered investment advisers are typically required to make various kinds of regulatory filings. For example, Section 13(d) of the Securities Exchange Act of 1934 and the rules thereunder require the purchaser of more than five percent of an issuer’s registered equity securities to report the purchase on Schedule 13D and to amend that Schedule promptly after any material change to the information contained in the Schedule. In a recent settlement order (Order) against an investment adviser, the SEC claimed that the adviser failed to file timely amendments to a Schedule 13D both after deciding to abandon a contemplated acquisition and after liquidating a significant portion of the position it had acquired in the potential target. This article discusses the relevant law and regulations, the adviser’s alleged violations and the terms of the Order, which is an important reminder that advisers should have robust policies and procedures for ensuring timely regulatory filings. See “How Fund Managers Can Navigate Sections 13(d) and 16 of the Exchange Act” (Feb. 28, 2019).

SEC Director Discusses the Pandemic’s Impact and Regulatory Developments in 2020

In the last few months, Dalia Blass, Director of the SEC’s Division of Investment Management (Division), has spoken about the impact of the coronavirus pandemic on the SEC and the industry; the Division’s accomplishments thus far in 2020; the regulatory agenda for the remainder of the year, which includes recommendations on proposals on investment adviser advertising and solicitation; and the keys to effective regulation. This article distills the key takeaways for private fund managers from two recent speeches delivered by Blass. For a look at recent speeches by other SEC Commissioners, see “SEC Officials Clarify the Commission’s Stance on ESG Investing and the Role of Disclosure” (Oct. 15, 2020).

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