Jul. 18, 2014

Private Equity and Hedge Fund Attorneys Join Willkie in London and New York

Matthew Dean and Claire McDaid will be joining Willkie Farr & Gallagher in London, the firm announced on July 14.  In addition, Scott A. Arenare recently joined Willkie as of counsel in the firm’s Asset Management Group in New York.  For insight from Willkie attorneys, see “SEC No-Action Letter Suggests That There May Be Circumstances in which Recipients of Transaction-Based Compensation Do Not Have to Register as Brokers,” Hedge Fund Law Report, Vol. 7, No. 7 (Feb. 21, 2014); “Investment Research and Insider Trading on ‘Outside Information’,” Hedge Fund Law Report, Vol. 4, No. 29 (Aug. 25, 2011).

Ropes & Gray Attorneys Discuss Implications for U.S. Hedge Fund Managers of the European Market Infrastructure Regulation

In response to the 2008 global financial crisis, the U.S., the EU and other developed economies implemented reforms to mitigate the systemic risks posed by derivatives.  In the U.S., those reforms were embodied in the 2010 Dodd-Frank Act.  See “How Have Dodd-Frank and European Union Derivatives Trading Reforms Impacted Hedge Fund Managers That Trade Swaps?,” Hedge Fund Law Report, Vol. 6, No. 40 (Oct. 17, 2013).  In August 2012, the European Commission adopted the Regulation on OTC Derivatives, Central Counterparties and Trade Repositories, also known as the European Market Infrastructure Regulation (EMIR), which imposed a central clearing regime for derivatives and other risk mitigation measures, including reporting and valuation requirements.  See “Comparing and Contrasting EMIR and Dodd-Frank OTC Derivatives Reforms and Their Impact on Hedge Fund Managers,” Hedge Fund Law Report, Vol. 6, No. 36 (Sep. 19, 2013).  Non-EU fund managers that trade derivatives with EU counterparties will be subject to certain of those provisions.  A recent program sponsored by Ropes & Gray LLP discussed the status of EMIR implementation and the impact of EMIR on U.S. fund managers.  This article highlights the main points from the program.

RCA PracticeEdge Session Highlights the Key Points of Intersection between ERISA and Hedge Fund Investments and Operations

Pension funds are a potentially huge source of capital for hedge fund managers.  However, accepting investments from pension plans governed by the Employee Retirement Income Security Act of 1974 (ERISA) is not without significant risks and drawbacks.  Of greatest concern to a hedge fund manager is that a fund will be deemed a “plan asset fund,” thereby making the manager an ERISA fiduciary and subjecting the fund to ERISA’s strict regulatory regime.  A recent PracticeEdge Session presented by the Regulatory Compliance Association provided an overview of the ERISA regime, with emphasis on when investment funds become subject to the ERISA regime, the consequences of being subject to that regime, the duties of ERISA fiduciaries and certain proposed or pending regulatory changes.  This article summarizes that session.  See also “What Should Hedge Fund Managers Expect When ERISA Plans Conduct Due Diligence on and Negotiate for Investments in Their Funds?,” Hedge Fund Law Report, Vol. 6, No. 25 (Jun. 20, 2013); “How Can Hedge Fund Managers Managing Plan Asset Funds Comply with the QPAM and INHAM Exemption Requirements?,” Hedge Fund Law Report, Vol. 6, No. 38 (Oct. 3, 2013).

How Can U.S. Hedge Fund Managers Use Passport and Mutual Recognition Initiatives to Market to Investors in Asia?

The European Union (EU) has facilitated the cross-border marketing of mutual funds through the Undertakings for Collective Investment in Transferable Securities regime.  It is also offering EU-domiciled alternative investment funds a marketing “passport” under the Alternative Investment Fund Managers Directive.  See “Four Approaches to Fund Marketing and Distribution Under the AIFMD,” Hedge Fund Law Report, Vol. 7, No. 21 (Jun. 2, 2014) (discussing marketing passports under the subheading “Private Placements”).  Countries in the Asia-Pacific region also have begun to facilitate the cross-border marketing of funds.  A recent program provided an overview of three relevant initiatives: The ASEAN (Association of Southeast Asian Nations) and APEC (Asia-Pacific Economic Cooperation) passports and the China-Hong Kong mutual recognition agreement.  See “Primary Regulatory and Business Considerations When Opening a Hedge Fund Management Company Office in Asia (Part Four of Four),” Hedge Fund Law Report, Vol. 5, No. 3 (Jan. 19, 2012).  This article highlights the primary fund marketing lessons derived from the program.  These lessons are particularly noteworthy for hedge fund managers looking to market, invest or operate in Asia.

Sanctions against Private Fund Manager for Retaliating against Whistleblower Highlight the Importance of Incentivizing Internal Reporting

In a recent order, the SEC sanctioned a private fund manager for taking adverse employment actions against a whistleblower who reported principal transaction compliance shortcomings to the SEC.  The interesting question raised by the order is what, if anything, the manager could have done with respect to the whistleblower’s employment without violating the anti-retaliation provisions of the Securities Exchange Act of 1934?  Phrased more generally, the order raises the question: What legal or operational options are available to a manager that fails to incentivize internal reporting of compliance violations?

Ropes & Gray Strengthens Investment Funds Practice in London

Ropes & Gray LLP recently announced the appointment of new London partner Monica Gogna, who will join the firm’s global investment funds group in August 2014.  Gogna has experience advising investment managers (including traditional managers as well as private equity and hedge fund managers), private banks, foreign governments and regulators on a wide range of regulatory issues.  For insight from Ropes & Gray, see “Estate Planning Tips for Hedge Fund Managers,” Hedge Fund Law Report, Vol. 7, No. 21 (Jun. 2, 2014); “Ropes & Gray Attorneys Discuss the Impact on Private Fund Managers of Final Regulations Under the Volcker Rule,” Hedge Fund Law Report, Vol. 7, No. 10 (Mar. 13, 2014); “Ropes & Gray Partners Share Experience and Best Practices Regarding the JOBS Act, the Volcker Rule, Broker Registration, Information Barriers, Examination Priorities, Multi-Year Incentive Fees and Swap Execution Facilities,” Hedge Fund Law Report, Vol. 7, No. 4 (Jan. 30, 2014); and “CFTC and SEC Adopt Long-Awaited Rules Excluding Most Hedge Funds from Swap Dealer Registration Requirements,” Hedge Fund Law Report, Vol. 5, No. 21 (May 24, 2012).