Each year since 2017, the SEC’s Enforcement Division (Enforcement) has issued an annual report summarizing its enforcement actions and results for the fiscal year (FY). For FY 2021, however, Enforcement merely issued a press release (Release) that highlights significant actions brought between October 1, 2020, and September 30, 2021, along with an addendum containing enforcement statistics for the year. “The SEC’s Enforcement Division is the cop on the beat for America’s securities laws,” said Chair Gary Gensler in the Release. “As these results show, we go after misconduct wherever we find it in the financial system, holding individuals and companies accountable, without fear or favor, across the $100‑plus trillion capital markets we oversee.” Enforcement Director Gurbir Grewal added in the Release, “This year has seen a number of critically important and first-of-their-kind enforcement actions, as well as record-breaking achievements for our whistleblower program, which we expect will lead to even more successful actions in the future.” Despite the lack of a more detailed annual report, hedge fund managers can still identify key trends and focus areas from this overview of recent enforcement activity. This article reviews the statistics and identifies six key takeaways for fund managers. For coverage of prior Enforcement annual reports, see the 2020 Report; 2019 Report; 2018 Report; and 2017 Report. Read full article …

One of the fundamental challenges facing fund managers that desire to achieve environmental, social or governance (ESG) goals through their investments is a lack of consistent terminology and data for measuring companies’ practices and the impact of investment strategies. A study by Util, a U.K.‑based technology company, found that “greenwashing” is widespread; so-called “sustainable” funds perform only marginally better than other funds in advancing the U.N.’s sustainable development goals; and investment activity generally has an adverse impact on the environment. Util’s report on its research also highlights the extreme complexity of measuring the impact of ESG investing. This article explores Util’s research and key findings, with insights from Util’s chief marketing officer, Elisabeth Steyn, who authored the report with Jose Maria López Sanz, Util’s chief technology officer. See “Morgan Lewis Attorneys Discuss the Global ESG Landscape” (Aug. 19, 2021); “Manager and Investor Interest in ESG Is Growing, According to Recent Global Hedge Fund Study (Part Two of Two)” (May 20, 2021); as well as our two-part series “Navigating the Evolving Legal and Regulatory ESG Investing Terrain”: Part One (Nov. 19, 2020); and Part Two (Dec. 10, 2020). Read full article …

In addition to staying aware of SEC guidance, rulemaking, statements, risk alerts and other overt indicators of the regulator’s areas of focus, hedge fund managers should also keep up to date on enforcement actions that may more subtly suggest the SEC’s key concerns. For example, two fairly unique SEC enforcement actions announced in fall 2021 have caused CCOs to think anew about insider trading and material nonpublic information. Those actions and other issues were addressed in a Practising Law Institute panel moderated by Gibson Dunn partner Mark K. Schonfeld. The panelists included Eric M. Albert, CCO and legal counsel at Holocene Advisors, LP; Kenneth J. Burke, head of compliance and senior counsel at Vista Credit Partners Management, LLC; and Igor Rozenblit, founder and partner at Iron Road Partners and former Co‑Head of the SEC’s Private Funds Unit. This article, the first in a two-part series, covers the discussion of those enforcement actions and their implications for hedge fund managers. The second article will summarize key takeaways from the discussion on current compliance challenges involving ESG investing and conflicts related to business expansion, as well as early goals for incoming CCOs. For more from Schonfeld, see “Regulatory and Employment Concerns for Managers Reopening Their Offices” (Aug. 6, 2020). Read full article …

Fund managers with a global focus face various complicated issues, including evolving tax regulations in the U.S. along with the complex trade and sanctions landscape. Furthermore, the U.S.-China relationship has implications for the hedge funds industry. In a panel at the recent Morgan Lewis Private Fund Investors Roundtable, which was hosted by partner Jedd Wider, the panelists discussed the above topics, among others. This second article in a two-part series presents the thoughts of various Morgan Lewis partners on recent tax developments; investment issues involving China; and the evolving trade and sanctions landscape. The first article discussed the key takeaways from the panelists on hedge fund performance, asset growth, investor allocation preferences, separately managed accounts and hybrid funds. See “Morgan Lewis Attorneys Discuss Updates to Exempt Offering Framework and Broker‑Dealer Registration Issues” (Jun. 3, 2021). Read full article …

Two-thirds of hedge funds, nearly half of private equity firms and two-fifths of venture capital firms presently use alternative data, and most do so to a significant or moderate extent, according to a recent survey by Lowenstein Sandler. The survey asked 125 alternative investment managers about their current and anticipated uses of alternative data; data sourcing; key concerns; demand for consumer transaction, social media and other categories of data; and its use in responsible investing. This article analyzes the survey results, with commentary from Lowenstein Sandler partner Peter D. Greene. For more from Greene, see “Key Compliance Considerations for Fund Managers Using Alternative Data” (Jan. 9, 2020). See also our three-part series on the opportunities and risks presented by big data: “Acquisition and Proper Use” (Jan. 11, 2018); “MNPI, Web Scraping and Data Quality” (Jan. 18, 2018); and “Privacy Concerns, Third Parties and Drones” (Jan. 25, 2018). Read full article …