Apr. 29, 2021

First 100 Days As GC/CCO: Preparing for the Role and Setting the Tone (Part One of Three)

U.S. presidents are judged by the goals and accomplishments of their first 100 days in office. As President Biden’s first 100 days draws to a close, it is useful to consider how that same standard can be applied to GC/CCOs that join fund managers anew. The first 100 days of a GC/CCO’s tenure provide a singular opportunity for him or her to set the expectations and tone for legal and compliance going forward. The 100‑day mark also provides a useful goalpost for new GC/CCOs to aim at when fulfilling certain crucial objectives. This first article in a three-part series offers advice for starting the GC/CCO role on the right foot, including how to prepare before day one and the best way to approach the first 100 days. The second article will explore how new GC/CCOs can accomplish two crucial goals in the first 100 days – gathering knowledge about the firm and building the foundation for solid relationships with key people. The third article will outline how new GC/CCOs can balance their day-to-day legal and compliance work as they settle into the job and organization, as well as how to identify and advocate improvements and changes. 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 Q2‑2021: Regulatory Filings and Other Considerations That Hedge Fund Managers Should Note in the Coming Quarter

Gary Gensler was recently sworn in as Chairman of the SEC, placing a veteran regulator and former Goldman Sachs partner in charge of overseeing the U.S. capital markets. Gensler’s background as the former Chair of the CFTC, along with his recent role researching and teaching blockchain technology and digital assets at MIT, may offer clues as to what to expect from his tenure at the SEC. He also oversaw significant structural changes in the derivatives market required by Dodd-Frank in response to the 2008 financial crisis – experience he is likely to revisit given recent events involving market participants’ use of leverage in the security-based swap markets. Through 2021, a key focus area for both the media and the SEC has been the trading of certain equities targeted by popular message boards. SEC investment adviser exams in that area have assessed, among other areas, risk management; liquidity; due diligence practices; trading operations and controls; electronic communications; and access person personal trading. Certain of the exam review areas also appear to fit in with the Division of Examinations’ 2021 examination priorities (Priorities). This sixteenth installment of the Hedge Fund Law Report’s quarterly compliance update, authored by consultants Joey Martinez, Dan Campbell, Julie Wersebe and Chris Ray of ACA Group (ACA), highlights upcoming filing deadlines and reporting requirements that fund managers should be aware of during the second quarter. This article also discusses the Priorities; increased SEC focus on environmental, social and governance issues; and enhanced regulatory interest in digital assets. For more from ACA, see our two-part series on a program that reviewed the SEC’s 2020 activity: “Challenges, Rulemaking and Guidance” (Feb. 4, 2021); and “Examination and Enforcement Trends” (Feb. 18, 2021).

Present and Former SEC Officials Discuss Commission Oversight of Private Funds

A recent AIMA program delved into the history and structure of the SEC; the behind-the-scenes interactions of its Divisions; the operations of its Divisions of Enforcement, Investment Management and Examinations; and the ways that the SEC interacts with the investment management industry. Terrance J. O’Malley, principal at consulting and market intelligence firm TJO Management, moderated the discussion, which featured Michael C. Neus, Private Funds Attorney Fellow at the SEC; C. Dabney O’Riordan, Co‑Chief of the Asset Management Unit of the SEC Division of Enforcement; and John H. Walsh, partner at Eversheds Sutherland and former Interim Director of the SEC Division of Examinations. This article distills their insights. See “The SEC Under the Biden Administration: Ten Areas to Watch” (Jan. 21, 2021).

Valuation, Conflicts and Misleading Disclosures Feature Prominently in SEC Settlements with Advisers’ Principals

The SEC recently issued a trio of settlement orders against the principals of a private credit fund’s adviser and the person who sourced investors for that fund. One co‑owner of the investment adviser allegedly failed to comply with the valuation and due diligence procedures outlined in the fund’s offering documents and made misleading disclosures to investors. The other co‑owner allegedly reviewed and approved misleading marketing materials. In addition, a broker-dealer/adviser representative disclosed to investors his compensation arrangements with the fund’s adviser but failed to disclose other sources of compensation from the fund or his and his family’s financial interests in the fund’s portfolio companies. This article analyzes the circumstances that gave rise to the SEC actions and the terms of the settlement orders issued by the SEC against each respondent. See “Key Compliance Issues Facing Credit Managers During the Pandemic” (Sep. 24, 2020).

WilmerHale Attorneys Review Recent CFTC Regulatory Actions (Part Two of Two)

A recent seminar sponsored by WilmerHale offered a comprehensive look at the CFTC’s enforcement and regulatory activities over the past year. The program featured partner Elizabeth L. Mitchell; senior counsel Paul M. Architzel, who was former Chief Counsel at the CFTC Division of Economic Analysis (now the Division of Market Oversight); special counsel Petal P. Walker, who was former Chief Counsel to CFTC Commissioner Sharon Bowen; special counsel Matthew Beville; and senior associate Aaron Friedman. This second article in a two-part series explores the panelists’ review of the CFTC’s rulemaking affecting pandemic-related operations; speculative position limits; swap execution facilities; digital assets; derivatives clearing organizations; margin and capital requirements; commodity pool operator/commodity trading advisor matters; regulatory reporting; cross-border swaps; and security-based swap dealers. The first article covered the portion of the program during which WilmerHale attorneys drilled down into the CFTC’s enforcement priorities, including market conduct, digital assets, foreign corruption, anti-money laundering, expectations for compliance programs, whistleblowers, coordination with other regulators and use of technology. See “Anticipating SEC and CFTC Enforcement Priorities Under the Biden Administration” (Mar. 18, 2021); and “WilmerHale Attorneys Detail 2016 CFTC Enforcement Actions and Potential Priorities Under Trump Administration” (Feb. 16, 2017).

Former MKP Capital Counsel Joins GAP

Guzman Advisory Partners (GAP), an outsourced GC firm, has added a new partner. Christine Chelf has joined GAP after serving as a senior principal consultant at an external consulting firm, where she advised hedge funds, private equity funds, venture capitalists and other asset managers on compliance and infrastructure, as well as SEC registrations and examinations. Chelf previously served as legal counsel at MKP Capital Management and as a member of a law firm investment management group. For insights from GAP’s other partners, see “Founders of New Outsourced GC Firm Discuss the Pandemic, Election and Industry Trends” (Dec. 3, 2020).