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    Jan. 21, 2021

To Scrape or Not to Scrape: The Potential Legal Implications of Using Web Scraping for Market Research

Through the use of automated processes performed by software, a web scraper visits a website and attempts to gather relevant data or information that may be provided on the site, such as consumer product reviews or social media profile data. That information may be readily accessible through a simple Google search, or it may require access through a click-through terms-of-service agreement or a firewall. Some investment advisers interested in web scraping conduct that activity in-house, while others may look to outside vendors to accumulate the information. The law regarding web scraping, however, is still developing and implicates a large number of statutory regimes and areas of common law. For example, web-scraping activity may implicate federal statutes, such as the Computer Fraud and Abuse Act, Digital Millennium Copyright Act and insider trading laws; state blue sky laws; privacy laws; and common law claims, such as breach of contract, fraud and trespass to chattels. In a guest article, Akin Gump attorneys Douglas A. Rappaport, Peter I. Altman and Kelly Handschumacher provide an overview of the evolving area of web-scraping law and practical guidance to investment advisers considering web scraping. For commentary from other Akin Gump partners, see “What Fund Managers Need to Know About the Legislative Response to #MeToo” (May 3, 2018); and “Beyond the Master-Feeder: Managing Liquidity Demands in More Flexible Fund Structures” (May 25, 2017).

Former SEC Enforcement Co‑Director Steven Peikin Discusses Enforcement’s Annual Report and SEC Developments (Part Two of Two)

In June 2017, Steven Peikin joined the SEC as Co‑Director of the Division of Enforcement (Division or Enforcement). Under the leadership of Peikin and Co‑Director Stephanie Avakian, the Division increased its efficiency and effectiveness in investigating and prosecuting securities violations. In November 2020, Peikin rejoined Sullivan & Cromwell as head of the firm’s securities and commodities investigation and enforcement practice in New York. The Hedge Fund Law Report recently spoke to Peikin in connection with his move. In this second article in our two‑part series, Peikin discusses the Division’s annual report, the whistleblower program, self-reporting, Enforcement’s use of technology, CCO liability, private funds and the pandemic. The first article set forth Peikin’s thoughts about his new position, his experience at the SEC and the relationship between Enforcement and the SEC’s Division of Examinations – formerly the Office of Compliance Inspections and Examinations, or OCIE. For commentary from another Sullivan & Cromwell partner, see “Attorney-Consultant Privilege? Key Considerations for Fund Managers When Utilizing, Invoking and Waiving the Kovel Privilege for Consultants (Part One of Three)” (Oct. 20, 2016).

The SEC Under the Biden Administration: Ten Areas to Watch

The SEC under the administration of President Joseph Biden will continue – and likely expand – its examination and enforcement efforts, including its scrutiny of private funds, according to a recent ACA Compliance Group (ACA) briefing. The program featured Carlo di Florio, ACA partner and chief services officer and former Director of the SEC’s Division of Examinations – formerly the Office of Compliance Inspections and Examinations, or OCIE; Joshua Broaded, ACA partner and co‑head of U.S. compliance; Karen Foley, partner at ACA Performance Services, LLC; and Dani Williams, principal consultant at ACA. This article distills the key takeaways from the presentation, including ten areas to watch on the regulatory front and steps CCO should take. See “Former OCIE Director Carlo di Florio Discusses His Time at the SEC and FINRA (Part One of Two)” (Nov. 14, 2019).

Risk Alert Focuses on “Large Trader” Disclosure, Reporting and Recordkeeping Duties

Rule 13h‑1 (Rule) under the Securities Exchange Act of 1934 sets forth identification, filing, recordkeeping and reporting requirements for market participants that conduct significant trading activity – known as “large traders” – and the broker-dealers through which they trade. In 2011, the SEC adopted the Rule to assist it with identifying and collecting data on large traders. The SEC uses the data it collects “to assess the impact of large trader activity on the securities markets, to reconstruct trading activity following periods of unusual market volatility, and to analyze significant market events for regulatory purposes,” according to the 2011 rule release. The SEC’s Division of Examinations (Division) – formerly the Office of Compliance Inspections and Examinations, or OCIE – recently issued a risk alert (Risk Alert) to assist investment advisers and broker-dealers with enhancing their compliance policies and procedures with respect to their obligations under the Rule and to remind broker-dealers of their upcoming reporting requirements under the Consolidated Audit Trail. The Risk Alert advises registrants “to thoroughly review and, where appropriate, amend their supervisory and compliance policies and procedures to ensure compliance with the Rule.” This article provides an overview of the Rule and reviews the Division’s findings and recommendations. See our coverage of other risk alerts on private fund managers; coronavirus pandemic compliance risks; transition from LIBOR; Regulation Best Interest and Form CRS; electronic messaging; the cash solicitation rule; best execution; fees and expenses; the advertising rule; common examination deficiencies; custody; cybersecurity; business continuity and disaster recovery plans; and social media.

Hot Tax Topics for Private Fund Investors and Managers

A recent panel at the FRA Private Investment Fund Tax and Accounting Forum delved into hot tax topics affecting private fund managers and their investors, including the impact of final IRS regulations on the deductibility of business interest expense; tax treatment of scrip dividends; the use of 70/30 baskets to preserve the dividend-received deduction; use of IRAs to invest in hedge funds; IRS scrutiny of managers that operate in Puerto Rico and the U.S. Virgin Islands; and tax treatment of special purpose acquisition companies. The program featured Richard A. Cagnetta, principal at Untracht Early LLC; and Anthony Tuths, principal at KPMG. This article explores their insights. See “2020 Year‑End Tax‑Planning Considerations for Fund Managers” (Dec. 10, 2020).

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