Mar. 18, 2021

The New Marketing Rule: Key Takeaways for Private Fund Managers (Part One of Two)

Since the so-called advertising and cash solicitation rules were adopted in 1961 and 1979, respectively, the world and the private funds space have changed dramatically. For example, in April 2018, Paul Cellupica, Deputy Director of the SEC’s Division of Investment Management, observed that the advertising and solicitation rules were adopted when social media, among other things, did not exist. Given the desperate need to modernize the advertising and cash solicitation rules, the Commission issued proposed changes to those rules in November 2019. On December 22, 2020, the Commission issued a new marketing rule (Marketing Rule), which amends the existing advertising rule and replaces the cash solicitation rule. This two-part series examines the Marketing Rule through the eyes of private fund managers. This first article examines important changes made to the originally proposed amendments and provides key takeaways for private fund managers. The second article will spell out the next steps for managers’ legal and compliance departments. See “The New Marketing Rule: Key Elements and Commissioner Concerns” (Mar. 4, 2021).

Anticipating SEC and CFTC Enforcement Priorities Under the Biden Administration

The SEC and CFTC will soon have new Chairs and Directors of Enforcement, who will put their own imprints on the agencies while continuing to advance their core missions. A recent seminar hosted by Brian T. Davis and Dimitri G. Mastrocola, partners at recruiting firm Major, Lindsey & Africa, examined the current enforcement landscape and discussed the agencies’ likely enforcement priorities in the coming years. The program featured Sullivan & Cromwell partners Steven Peikin, former Co‑Director of the SEC Division of Enforcement; and James McDonald, former CFTC Director of Enforcement. This article distills the key takeaways from the presentation. See our recent two-part interview with Peikin: “New Position and Experience at the SEC” (Jan. 14, 2021); and “Enforcement’s Annual Report and SEC Developments” (Jan. 21, 2021). See also our recent two-part interview with McDonald: “New Role and CFTC Experience” (Feb. 18, 2021); and “Whistleblowers, Trends, the New Administration and the Pandemic” (Feb. 25, 2021).

Preserving Privilege for In‑House Counsel: Communications and Common Issues (Part One of Two)

In-house counsel often wear multiple hats, which can complicate or even eliminate the opportunity to assert attorney-client privilege, panelists at a recent Strafford panel explained. The program featured Kimberly M. Ingram, associate at Bradley Arant; Kenneth E. McKay, shareholder at Baker Donelson; and Kan M. Nawaday, partner at Venable. This first article in our two-part series outlining the takeaways from the panel covers best practices when communicating with in-house counsel and establishing privilege, as well as how to handle common privilege issues, such as waivers, auditor reports and mergers. The second article will cover how privilege can be maintained in internal investigations and how to prepare when a litigant seeks to depose in-house counsel. See “When and How Attorney-Client Privilege Applies to Communications With In-House Counsel” (Jun. 22, 2017).

How Private Funds May Gain Exposure to Virtual Currencies

The price of bitcoin has spiked in the past year, as major companies such as Tesla and institutional investors have purchased significant amounts. Fund managers may seek exposure to virtual currencies or cryptocurrencies directly or through registered products. A recent Thompson Hine seminar examined publicly traded products that hold bitcoin; issues for private fund managers that seek to hold digital assets; SEC staff positions on registered funds that hold virtual currencies and related products; and associated tax considerations. The program featured Thompson Hine partners Cassandra W. Borchers and JoAnn M. Strasser. This article highlights the key takeaways from their presentation. See our two-part series “Symposium Examines the State of the Cryptocurrency Market”: Part One (Jun. 25, 2020); and Part Two (Jul. 16, 2020).

Can Reddit's Influence Be Regulated? SEC Commissioner Discusses Recent Market Volatility

The trading world was recently beset by volatility, fueled by a rush of trading spurred on by threads on Reddit, as various companies’ market values increased dramatically and then fell sharply. Accompanying those market events was strong media focus on “market volatility, trading volumes, regular-Joe-to-riches stories, hedge fund losses, short squeezes, gamma squeezes, glee at sticking it to the ‘suits,’ anger at trading limitations, a jumble of emotions as stock prices fell from their highs, and debates about the intricacies of market structure,” SEC Commissioner Hester M. Peirce pointed out in recent remarks. This article summarizes Peirce’s speech in which she offered her musings on the challenges that lie before the SEC as it decides whether and how to react to the Reddit-fueled events with new or modified regulations and, more generally, as the Commission considers its role as a regulator of the digital economy. For further commentary from Peirce, see our two-part coverage of the HFLR’s fireside chat featuring the Commissioner: “Fiduciary Duty, Accredited Investor Standard and CCO Liability” (Nov. 21, 2019); and “Rule Updates, Technological Change, Role of Enforcement and Hot‑Button Issues” (Dec. 5, 2019). For coverage of other speeches by Peirce, see “Views on Personal Liability for CCOs” (Nov. 5, 2020); “Enforcement Efforts and Reforms” (Feb. 20, 2020); and “The Power of ‘No’: SEC Commissioner Peirce on Enforcement as Last Resort” (Jun. 21, 2018).

Former Soros GC Rejoins WilmerHale in New York

WilmerHale announced the return to the firm of Boyd Johnson as a partner in the firm’s white collar defense and litigation practices. Johnson will rejoin the firm’s New York office after serving as GC for Soros Fund Management. He also served as the Deputy U.S. Attorney for the Southern District of New York, where he supervised more than 200 Assistant U.S. Attorneys and managed, among other matters, the largest criminal enforcement effort against hedge fund insider trading in history. See “Morgan Stanley Sues Former FrontPoint Partners Portfolio Manager Joseph F. ‘Chip’ Skowron III for Losses Allegedly Caused by Skowron’s Insider Trading and Subsequent Cover-Up” (Nov. 21, 2012); and “On Motion to Set Aside Verdict, Trial Court Upholds All Fourteen Counts of Rajaratnam Insider Trading and Conspiracy Conviction” (Sep. 1, 2011).