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    Jan. 15, 2015

HFLR-Advise Technologies Panel Explores AIFMD Marketing and Annex IV Reporting Requirements

On December 2, 2014, Hedge Fund Law Report and Advise Technologies sponsored a panel discussion that provided practical guidance on the Annex IV reporting regime under the AIFMD, discussed how that regime overlaps with the U.S. Form PF reporting regime, and considered how and whether “soft marketing” and “reverse solicitation” may be used in the E.U. by managers who wish to avoid or postpone the reporting requirements imposed on managers who market funds in the E.U. under national private placement regimes.  The program, entitled “An in depth discussion on AIFMD reporting requirements and lessons learned from those who have already filed,” featured Jeanette Turner, Managing Director and General Counsel for Advise Technologies, LLC; Simon Whiteside, a partner at Simmons and Simmons LLP; Richard Webley, Head of Business Advisory Services for Americas, Citi Investor Sales and Relationship Management; and John Sampson, an Executive Director at Ernst & Young LLP.  This article summarizes the key insights from that presentation.  For an overview of Annex IV reporting issues, see “Key Pain Points in AIFMD Annex IV Reporting and Proven Strategies for Surmounting Them,” Hedge Fund Law Report, Vol. 7, No. 44 (Nov. 20, 2014).  See also “Answers to Questions Most Frequently Asked by U.S. and Other Non-E.U. Managers on the Impact and Implementation of the AIFMD,” Hedge Fund Law Report, Vol. 8, No. 1 (Jan. 8, 2015).

Public-Side Versus Private-Side Information – Which Side To Take?

Fund managers investing in distressed debt, syndicated loans, notes and other types of debt often get invited to data rooms and deal websites where they are offered access to confidential information about a borrower.  In contrast to the traditional (perhaps, now antiquated) method of obtaining confidential borrower information directly from an existing lender or a dealer, subject to a written non-disclosure agreement, obtaining confidential information through such data rooms presents a number of special concerns.  First, the bank or dealer responsible for the data room commonly asks existing and potential lenders to choose between so-called “public-side” information and “private-side” information.  Second, in relation to distressed debt, the information so offered is often related to a restructuring, refinancing or other significant event with respect to the borrower and, especially with respect to what is labeled as “private-side” information, tends to be of a higher level or quality than the information generally available to all lenders or debt holders.  Third, the agreement embodying the terms of disclosure is typically contained in a non-negotiable splash page or a “click-through” agreement rather than a conventional, written, bilateral confidentiality agreement negotiated, executed and exchanged by trading parties.  See “Key Legal and Business Considerations for Hedge Fund Managers in Drafting and Negotiating Confidentiality Agreements (Part Three of Three),” Hedge Fund Law Report, Vol. 5, No. 28 (Jul. 19, 2012).  In addition, there is often some confusion on the part of traders and analysts regarding the true nature of public-side versus private-side information and the consequences of choosing one or the other.  In a guest article, William G. Frenkel and Michael Y. Sukhman, partners at Frenkel Sukhman LLP, discussed the legal consequences and risks associated with making that decision.  For a discussion of another legal issue relevant to distressed debt trading, see “Can a Hedge Fund Holding Secured Debt Credit Bid Up to the Face Amount of the Debt Or Only Up to the Amount Paid for the Debt?,” Hedge Fund Law Report, Vol. 7, No. 7 (Feb. 21, 2014).

Critical Components of a Hedge Fund Manager Cybersecurity Program: Resources, Preparation, Coordination, Response and Mitigation

A recent PracticeEdge session offered by the Regulatory Compliance Association (RCA) reviewed the current cybersecurity landscape and offered practical guidance for implementing cybersecurity measures, developing a cybersecurity response plan and mitigating cybersecurity risks.  The program was introduced by Walter Zebrowski, principal of Hedgemony Partners and RCA Chairman, and moderated by Ralph Mittl, a principal at Ernst & Young (EY) and RCA Senior Fellow.  It featured Christopher Hetner, a Senior Information Security Executive at EY; Jaime Kahan, a principal of EY; Scott D. Pomfret, Regulatory Counsel and Chief Compliance Officer at Highfields Capital Management LP; and Gerard M. Stegmaier, a partner at Goodwin Procter LLP.  See also “Weil Attorneys Discuss U.S. and E.U. Cybersecurity Risks and Compliance Issues Relevant to Private Fund Managers,” Hedge Fund Law Report, Vol. 7, No. 45 (Dec. 4, 2014).  In April of this year, the RCA will be hosting its Regulation, Operations and Compliance (ROC) Symposium in Bermuda.  For more on ROC Bermuda 2015, click here; to register for it, click here.

SEC’s Rozenblit and Law Firm Partners Explain the SEC’s Enforcement Priorities and Offer Tips on How Hedge Fund and Private Equity Managers Can Avoid Enforcement Actions (Part Three of Four)

This is the third article in a four-part series covering the Practising Law Institute’s (PLI) Hedge and Private Fund Enforcement & Regulatory Developments 2014 event, chaired by Barry Goldsmith, a partner at Gibson Dunn & Crutcher and co-head of its Securities Enforcement Practice.  The first article in this series discussed key points made by Julie M. Riewe, Co-Chief of the SEC’s Asset Management Unit, on enforcement trends, principal transactions, conflicts raised by side-by-side management, valuation, allocation of expenses and the potential deterrent value of smaller enforcement actions.  The second article addressed CFTC enforcement concerns and cases, New York Attorney General’s Office initiatives and defense strategies for avoiding and managing government investigations.  This third article in the series focuses on: (1) SEC priorities for inspections and examinations of private fund advisers; (2) new technology and quantitative examination tools; (3) best practices for preparing for inspections and examinations; (4) how to interact with regulators to maximize positive outcomes and minimize the chance of an enforcement referral; and (5) how to preserve attorney-client privilege while complying with requests for information.  The participants in the relevant PLI panel included Hannah Berkowitz, a shareholder at Murphy & McGonigle, P.C.; Marc Elovitz, a partner and chair of Schulte Roth & Zabel’s Investment Management Regulatory & Compliance Group; Igor Rozenblit, co-head of the Private Funds Unit at the SEC’s Office of Compliance Inspections and Examinations; and John H. Walsh, a 23-year veteran of the SEC and partner at Sutherland Asbill & Brennan LLP.  See “Three Steps in Responding to an SEC Examination Deficiency Letter and Other Practical Guidance for Hedge Fund Managers from SEC Veteran and Sutherland Partner John Walsh,” Hedge Fund Law Report, Vol. 7, No. 6 (Feb. 13, 2014).

Ernst & Young’s 2014 Global Hedge Fund and Investor Survey Considers Growth Areas for Hedge Fund Managers, Related Costs and Challenges, Operating Expenses and Cybersecurity

Ernst & Young (EY) recently released its 2014 Global Hedge Fund and Investor Survey.  The survey covered areas of potential growth for hedge fund managers, challenges and costs associated with growth, expense ratios, investments in operations and cybersecurity concerns.  This article offers a detailed discussion of the survey findings.  For HFLR coverage of last year’s EY survey, see “Ernst & Young’s 2013 Global Hedge Fund and Investor Survey Describes Trends in Asset Sourcing, Alternative Mutual Funds, Customized Solutions, Staffing, Administrator Shadowing, Expense Pass-Throughs and Outsourcing,” Hedge Fund Law Report, Vol. 6, No. 46 (Dec. 5, 2013).  For HFLR coverage of EY surveys from prior years, see 2012 survey, 2011 survey, and 2009 survey.

Willkie Welcomes James E. Anderson

Willkie Farr & Gallagher LLP recently announced that asset management and enforcement lawyer James E. Anderson has joined the firm as a partner in the Washington office.  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).

Alternative Investments Lawyer Michael A. Adelstein Joins Kelley Drye

On January 13, 2015, Kelley Drye & Warren LLP announced that Michael A. Adelstein has joined the firm’s Corporate Practice as a partner in the New York office.  He represents hedge funds and others in, among other categories of matters, registered direct transactions and private investments in public equity (PIPEs).  For more on PIPEs, see “Former Federal Prosecutors Share Perspectives on Insider Trading Hot-Button Issues and Enforcement Trends Relevant to Hedge Fund Managers,” Hedge Fund Law Report, Vol. 5, No. 39 (Oct. 11, 2012).  For insight from Kelley Drye, see “What Is Synthetic Prime Brokerage and How Can Hedge Fund Managers Use It to Obtain Leverage?,” Hedge Fund Law Report, Vol. 3, No. 13 (Apr. 2, 2010).

Coherence Capital Partners Hires John Lovisolo as COO and CRO

Coherence Capital Partners LLC, a New York-based asset manager and advisory firm focused on the fixed income markets, recently announced the hire of John Lovisolo as Member, Chief Operating Officer and Chief Risk Officer.  See  “Ernst & Young Survey Shows Risk Managers Possess Tremendous Influence and Face Substantial Challenges in the Asset Management Industry,” Hedge Fund Law Report, Vol. 5, No. 23 (Jun. 8, 2012); “What Is a Chief Risk Officer, and Should Hedge Fund Managers Have One?,” Hedge Fund Law Report, Vol. 2, No. 31 (Aug. 5, 2009).

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