Jul. 22, 2021

NYC Bar Framework for CCO Liability: CCO and Regulator Perspectives (Part Two of Two)

Since the SEC brought several enforcement actions against CCOs in 2014 and 2015, the CCO community has believed that it is being unfairly targeted by the SEC. In response to those concerns, 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 released a report (Framework). The Framework is a reflection of the Association’s belief that the “creation of a formalized regulatory framework describing nonbinding factors for the SEC to consider in determining whether to charge a CCO is a crucial next step to providing the enforcement clarity CCOs seek.” This article, the second in a two-part series, discusses CCO liability in general and the Framework specifically, through the eyes of current and former CCOs, as well as a former SEC Enforcement Division official. The first article explained the reasoning for the Framework and provided an overview of its components, as well as two additional proposals by the Association. See “How CCOs Can Avoid Personal Liability for Organizations’ Compliance Failures” (Mar. 11, 2021).

How Do You Put a System of Privacy and Security Controls in Place When Your Target Keeps Moving?

In the current dynamic regulatory environment, adapting a flexible framework with a system of controls based on core privacy and cybersecurity principles will allow fund managers to get ahead of any future requirements and avoid a complete overhaul of their systems. In this guest article, Akin Gump attorneys Michelle Reed and Madison Gafford explore the current legal landscape and detail the three stages of control implementation to decrease the risk of liability from breaches and privacy incidents. For more on privacy, see our two-part series on preparing for and engaging with the California Consumer Privacy Act of 2018: “How Fund Managers Can Evaluate If They Are Subject to the New Law” (Sep. 26, 2019); and “How Fund Managers Can Prepare for Compliance with the Act” (Oct. 3, 2019).

SEC Exam and Enforcement Priorities: Cybersecurity, Business Continuity and Conflicts of Interest (Part One of Two)

A recent program at Seward & Kissel’s Seventh Annual Private Funds Forum explored the current SEC examination and enforcement climate affecting private fund advisers. Seward & Kissel partner Christopher Riccardi moderated the discussion, which featured partners Debra Franzese and Kevin Neubauer, along with counsel Daniel Bresler. This first article in a two-part series discusses the key takeaways from the presentation on the agency’s continuing focus on cybersecurity, business continuity plans and conflicts of interest. The second article will present the speakers’ thoughts on the SEC’s interest in responsible investing and the new marketing rule, as well as other potential areas for SEC enforcement activity. See “CCOs Share Recent SEC Exam Experiences” (Apr. 15, 2021).

Recent Regulatory and Market Developments Affecting Digital Asset Funds and Digital Securities

The digital assets landscape continues to rapidly evolve. A recent program at the ACA Spring Conference examined the evolution of investment vehicles for digital assets; digital asset fund structures; custody, tax and other regulatory concerns associated with digital asset funds; regulatory developments affecting broker-dealers involved in digital asset transactions; digital securities; private permission blockchains; and stablecoins. The program featured Stephanie Breslow, partner at Schulte Roth & Zabel; Rashad Kurbanov, CEO and co‑founder of iownit capital and markets, Inc.; Pat LaVecchia, CEO and co‑chairman of Oasis Pro Markets, LLC; and Anthony Perez, director at ACA Group. This article distills their insights. See “HFLR Cryptocurrency Webinar Examines Regulatory Developments, ICOs, Cryptocurrency Sweep, Custody and Other Compliance Issues” (May 3, 2018).

How Fund Managers Can Ensure They Have Effective Tax Disclosures in PPMs

Tax considerations are a key driver of private fund structuring. A panel at the recent FRA Private Investment Fund Tax Master Class discussed the importance of ensuring that the tax disclosures included in a fund’s private placement memoranda match the structure and strategy of the fund set forth in its governing documents and explored the types of tax issues that are usually addressed in domestic funds, offshore funds and hybrid situations. The program featured David Benz, formerly a partner at Crowe LLP, and James C. Cofer, partner at Seward & Kissel. This article highlights the most relevant points from the discussion. For more from FRA, see “Hot Tax Topics for Private Fund Investors and Managers” (Jan. 21, 2021).