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    Feb. 2, 2023

The Impact of New York City’s New Wage Transparency Law on Private Fund Manager Hiring

On November 1, 2022, a new wage transparency law took effect in New York City that requires employers to include a good faith range of salaries in all advertisements for a job, promotion or transfer opportunity that can or will be performed in New York City. Given the concentration of private fund managers in New York City, the new law will certainly affect their hiring practices in what is an already challenging employment environment. To better understand the new law and its implications for fund managers’ hiring efforts, the Hedge Fund Law Report spoke to Martin Schmelkin, a partner at Schulte Roth & Zabel LLP who specializes in representing fund managers in employment matters. This article presents Schmelkin’s thoughts on the law’s scope, requirements and implications. For coverage of another New York City compensation-related law, see “Four Steps NYC-Based Fund Managers Should Take in Light of Newly Enacted Law Prohibiting Compensation History Queries When Interviewing Prospective Employees” (May 11, 2017).

Overview of the SEC’s Standards for Resilient and Effective Compliance Programs and Fiduciary Practices (Part Two of Two)

At times, it is valuable for fund managers to take a step back to evaluate the SEC’s actions at a higher level, including the interplay between its examination priorities, risk alerts, rule proposals, regulatory agenda, speeches and enforcement actions. That holistic evaluation can help managers keep their proverbial fingers on the pulse of the SEC’s stance and efforts as to the private funds industry. To assist with that process, the Practising Law Institute hosted a panel that was moderated by Maria Gattuso, principal at Deloitte, and featured Richard Gorman, CCO of Jackson National Asset Management, LLC; Paulita A. Pike, partner at Ropes & Gray; and Maurya C. Keating, Associate Regional Director of the SEC’s New York Regional Office, Co‑Head of the New York Regional Office’s Investment Adviser Investment Company Unit and Co‑Acting Regional Director. This second article in a two-part series details the panel’s insights on compliance program resilience; cybersecurity; standards of conduct and Regulation Best Interest; financial technologies; and CCO liability. The first article evaluated recent SEC examination trends and key items in the SEC’s Division of Examinations’ 2022 priorities, such as fees and expenses; valuations and conflicts of interest; and environmental, social and governance offerings and disclosures. See our coverage of Examinations’ 2022 Priorities; 2021 Priorities; 2020 Priorities; 2019 Priorities; 2018 Priorities; 2017 Priorities; and 2016 Priorities.

SEC Settles Nine Enforcement Proceedings Over Custody Rule and Related Form ADV Violations

Safeguarding of client assets is one of an investment adviser’s fundamental duties. Thus, there is nothing surprising about the SEC’s strict enforcement of Rule 206(4)‑2 under the Investment Advisers Act of 1940, commonly known as the “Custody Rule.” Many private fund advisers comply with the Custody Rule by delivering an audited financial statement to each fund investor, which they must disclose in their Forms ADV. The SEC recently resolved enforcement proceedings against nine private fund advisers that allegedly either delivered untimely financial statements and/or failed to update their Forms ADV promptly after receiving their fund auditor’s report. Untimely delivery of audited financials has been the basis for numerous SEC enforcement proceedings. Here, however, many of the advisers were also taken to task because they waited until their next annual Form ADV amendment to disclose receipt of an auditor’s report. This article details the relevant regulatory requirements, the alleged violations and the terms of the settlement orders. For more on these enforcement actions, see “Compliance Corner Q4‑2022: Regulatory Filings and Other Considerations That Hedge Fund Managers Should Note in the Coming Quarter” (Oct. 6, 2022).

SEC and CFTC Received Record Number of Whistleblower Tips and Made a Record Award in 2022

Established by the Dodd-Frank Act, the SEC’s Office of the Whistleblower and the CFTC’s Whistleblower Office have been operating for more than a decade. The two offices recently released their annual reports for the 2022 fiscal year, which ended on September 30, 2022. The reports reveal that they received a record number of tips and made several multi-million dollar awards – including a record-setting award of nearly $200 million. As is customary, to avoid revealing the identity of whistleblowers, the reports provide no details about any of the matters that led to awards. This article synthesizes the key takeaways from the reports. See “Chief of SEC’s Whistleblower Office Discusses Program’s Continuing Success After Its First Decade” (Mar. 25, 2021); and “Former CFTC Enforcement Director Discusses Whistleblowers, Trends, the New Administration and the Pandemic (Part Two of Two)” (Feb. 25, 2021).

How the New E.U.-U.S. Data Privacy Framework Clears a Path for Transatlantic Business

After two years of intense discussions between the U.S. and the European Union about how to address the challenges presented by the Schrems II decision, President Biden signed an Executive Order on Enhancing Safeguards for United States Signals Intelligence Activities, implementing the long-awaited E.U.-U.S. Data Privacy Framework and clearing a path for transatlantic business. See “U.K. Data Protection Regulator Smooths Way for Fund Managers to Transfer Data to the SEC” (May 20, 2021).

Three Investment Fund Lawyers Are Founding Partners of New K&L Gates Office in Dublin

K&L Gates LLP has established an office in Dublin, Ireland, with the hiring of asset management and investment funds lawyers Gayle Bowen, Shane Geraghty and Michelle Lloyd as the office’s founding partners. For more insights from K&L Gates attorneys, see “K&L Gates Program Examines Recent CFTC Developments Affecting CPOs and CTAs” (Feb. 27, 2020).

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