Jul. 15, 2021

NYC Bar Framework for CCO Liability: Components and Proposals (Part One of Two)

In an October 2020 speech, SEC Commissioner Hester M. Peirce called for a framework detailing which circumstances would cause the SEC to seek personal liability from CCOs and which would militate against personal liability. Peirce argued that such a framework would help the compliance community by “eliminating uncertainty and inspiring good practices,” while aiding the SEC’s staff in deciding whether to charge CCOs. The New York City Bar Association (Association), in conjunction with the American Investment Council; the Association for Corporate Growth; and the Securities Industry and Financial Markets Association, recently granted Peirce’s request, releasing a framework for CCO liability in the financial sector (Framework). This first article in a two-part series explains the reasoning for the Framework and provides an overview of its components, as well as two additional proposals by the Association. The second article will discuss CCO liability in general, as well as the Framework specifically, through the eyes of current and former CCOs, along with a former SEC Enforcement Division official. See “SEC Commissioner Peirce Shares Views on Personal Liability for CCOs” (Nov. 5, 2020); and “NYC Bar Report on CCO Liability Calls for More Regulatory Guidance, Transparency and Cooperation” (Mar. 5, 2020).

Practical Guide for Private Fund Managers Navigating SEC Exams in the Biden/Gensler Era (Part Two of Two)

With the new President and new SEC Chair, it is anticipated that the SEC’s Division of Examinations will increase its scrutiny of private fund managers. Thus, it is more important than ever for private fund managers to try to ensure a well-managed examination (from both process and strategy viewpoints) and, if appropriate, to implement necessary or advisable remedial measures within the exam process to lessen the odds of a referral to the Division of Enforcement. More broadly, opening early and constructive lines of communication with exam staff is essential and indirectly conveys that the compliance function is a respected and supported part of the firm. In a two-part guest series, Simpson Thacher partners Meaghan A. Kelly and Michael J. Osnato, Jr., along with senior counsel Allison S. Bernbach, provide a practical guide to help private fund managers navigate SEC exams in this new environment. This second article furnishes guidance for the period after notification of an exam, during the exam and after the exam, including responding to any deficiencies. The first article explored general expectations as to exams and set forth practical tips to ensure managers are ready for exams. See “The SEC Under the Biden Administration: Ten Areas to Watch” (Jan. 21, 2021).

State AGs Share Breach Notification Tips and Latest Enforcement Concerns

The offices of state attorneys general (AGs) have assumed active roles in data breach and privacy enforcement. They worked together in 2020 and 2021 on several multistate settlements and have obtained greater authority over routine cybersecurity, with at least 25 states now mandating reasonable security efforts. Privacy and security leaders from six state AGs recently discussed their views about the thousands of breach notifications they field each year and suggested how fund managers and other companies can best navigate the enforcement process. Speaking at International Association of Privacy Professionals and Practising Law Institute events, the regulators also described their approaches to investigations, their top enforcement concerns and recent changes in their regulatory powers and resources. This article also includes commentary from state AG practice specialists at Cozen O’Connor. See “What Fund Managers Can Learn About Cyber-Breach Disclosure From Yahoo’s $35‑Million SEC Settlement” (May 10, 2018).

Current Insider Trading Regulatory and Enforcement Environments: Appropriate Policies and Procedures (Part Two of Two)

One issue that is always a priority for the SEC is insider trading. Thus, Seward & Kissel's Seventh Annual Private Funds Forum included a panel that examined the current regulatory and enforcement environment around insider trading. The discussion was moderated by Seward & Kissel partner Patricia A. Poglinco and featured partners Paul M. Miller and Jack Yoskowitz, as well as counsel Philip Moustakis. This second article in a two-part series presents the panelists’ observations on recent examination focus on insider trading policies and procedures; the development of appropriate policies and procedures for handling material nonpublic information; trade surveillance and monitoring; use of alternative data; and the prospects for enforcement activity under Chair Gary Gensler. The first article analyzed the panelists’ insights on the various ways that the SEC obtains information about potential insider trading; SEC requests for information about trading issues; and recent enforcement activity and litigation. See “How Fund Managers Can Handle Insider Trading Risks After U.S. v. Chow” (Jun. 24, 2021).

The Global Hedge Funds Landscape: Europe, Asia and the Middle East (Part Two of Two)

At the recent Morgan Lewis Advanced Topics in Hedge Fund Practices Conference, a panel of globally based Morgan Lewis attorneys explored the international hedge fund landscape. This second article in a two-part series covers the portions of the program devoted to regional issues in Europe, Asia and the Middle East, as discussed by Morgan Lewis partners Tomoko Fuminaga, Ethan W. Johnson, William L. Nash, Joel Seow and William Yonge. The first article addressed the portions of the program devoted to accessing non‑U.S. institutional capital, including the role of sovereign wealth funds, direct investments and co-investments, along with recent developments in the U.S. sanctions regimes affecting investment in China and Hong Kong. See “Recent Developments in Fund Structuring and Marketing in the E.U., U.K. and Asia” (May 27, 2021).