Much has changed in the world in general, and in the investment adviser space specifically, in the decades since the SEC adopted Rule 206(4)‑1 under the Investment Advisers Act of 1940 (Advisers Act) – the so-called “advertising rule” – and Rule 206(4)‑3 under the Advisers Act – the “cash solicitation rule.” For example, advertising and referral practices have evolved, while the technology used for communications has advanced and investor expectations have changed. Thus, in November 2019, the Commission issued proposed changes to the advertising and cash solicitation rules. Following receipt of more than 100 comments voicing concerns with the proposed changes, the Commission recently issued a 430‑page release announcing a new so-called “marketing rule” (Marketing Rule), which amends the existing advertising rule and replaces the cash solicitation rule. It also amends Rule 204‑2 (the books and records rule) and Form ADV. This article reviews the key elements of the Marketing Rule of particular interest to private fund managers and examines some concerns the SEC Commissioners have with it. For discussion of the originally proposed changes to the advertising and cash solicitation rules, see “What the SEC’s Proposed Amendments to the Cash Solicitation Rule Mean for Private Fund Advisers” (Dec. 19, 2019); and “SEC Proposes Expanding Permissible Performance Advertising Practices With Favorable Treatment for Private Fund Managers” (Dec. 5, 2019). Read full article …

With the U.K. no longer subject to the E.U.’s jurisdiction, many may conclude that the General Data Protection Regulation (GDPR) is of no further interest or concern to U.K. fund managers. Such a conclusion, however, could be premature. In a guest article, Seddons partner Alexander Egerton explores why the GDPR is perhaps more relevant for U.K. fund managers following Brexit than before, how the requirement for an E.U. representative works and what its impact is on the U.K.’s Information Commissioner’s Office as the “one-stop shop.” It also provides three data privacy steps U.K. managers can take now given the change in the regulatory landscape. See our two-part series on the GDPR: “Impact” (Feb. 21, 2019); and “Compliance” (Feb. 28, 2019). Read full article …

Under pressure from the E.U., the Cayman Islands has been seeking to increase the transparency of its substantial private funds industry. In February 2020, it adopted the Private Funds Act (Act), which established a registration regime for closed-end funds. In July 2020, it amended the Act to increase its scope. At a recent program presented by law firm Carey Olsen, partners Jasmine Amaria and Jarrod Farley discussed the adoption and fundamental requirements of the Act, the impact of the July amendment and the available guidance under the Act. This article discusses the key takeaways from the presentation. See “Cayman Makes Legislative Changes in Line With Global Transparency Drive” (Nov. 14, 2019). Read full article …

In 2019, the U.S. District Court for the Eastern District of New York (District Court) granted summary judgment in a shareholder derivative suit, directing a hedge fund to disgorge nearly $5 million of short-swing profits for violating Section 16(b) of the Securities Exchange Act of 1934 in connection with its trading in the shares of an issuer. The issue on appeal was whether the fund – which had delegated voting and trading authority to its investment adviser – was a beneficial owner of the company. The U.S. Court of Appeals for the Second Circuit (Court) ruled that there were issues of fact as to whether the fund was a beneficial owner, vacated the District Court’s judgment and remanded the case for further proceedings. This article analyzes the Court’s decision. See “Delegation of Investment and Voting Authority to a Fund’s Investment Adviser Does Not Shield the Fund From Liability for Short‑Swing Trading Profits” (Oct. 10, 2019). Read full article …

J.P. Morgan Asset Management (JPM) has released its third annual Global Alternatives Outlook report. The report sets forth JPM’s broad economic outlook for the coming year and its perspective on six segments of the alternative investments landscape, include hedge funds, private credit, private equity, infrastructure, transport and real estate. This article outlines JPM’s views and predictions, with additional insights from Anton Pil, head of global alternatives at JPM. For coverage of JPM’s 2020 report, see “Opportunities for Hedge Funds, PE and Other Alternative Investments” (Mar. 5, 2020). Read full article …