Jul. 2, 2015

SEC Commissioner Calls for Increased Examination of Alternative Mutual Funds

In a recent speech, SEC Commissioner Kara M. Stein argued that alternative mutual funds operate in a “gray area” of mutual fund regulation and called for increased examination of those funds and their operation within the restrictions of the Investment Company Act of 1940.  Using the 75th anniversary of the Investment Company Act as an occasion for her speech, Stein discussed the history of the regulatory framework for investment companies; argued that mutual funds and other registered companies have drifted from the principles of the Investment Company Act; and provided her thoughts on alternative mutual funds and retail investors.  This article summarizes Stein’s statements.  For additional insight from SEC officials, see “SEC Commissioner Speaks Out Against Trend Toward Strict Liability for Compliance Personnel,” Hedge Fund Law Report, Vol. 8, No. 25 (Jun. 25, 2015); and “Acting OCIE Director Discusses the Office’s Focus on Private Equity Managers and Emphasizes the Importance of Disclosure by Advisers,” Hedge Fund Law Report, Vol. 8, No. 21 (May 28, 2015).

RCA Panel Highlights Conflicts of Interest Affecting Fund Managers

Regulators and investors have placed increased emphasis on the management of conflicts of interest by hedge fund managers.  Fund managers must ensure conflicts are identified, mitigated and properly disclosed.  In addition, fund managers must establish a conflicts policy that is followed within the firm.  See “ACA Compliance Professionals and SEC Veteran John H. Walsh Share Insights on SEC Priorities for 2015,” Hedge Fund Law Report, Vol. 8, No 16 (Apr. 23, 2015); and “Conflicts Remain an Overarching Concern for the SEC’s Asset Management Unit,” Hedge Fund Law Report, Vol. 8, No. 10 (Mar. 12, 2015).  During the RCA’s recent Enforcement, Compliance & Operations Symposium, panelists discussed the identification of potential conflicts of interest; conflicts relating to allocations of expenses and allocation of investment opportunities; conflicts between products; and valuation conflicts.  This article highlights the salient points made during the discussion.  For additional coverage of the Symposium, see “RCA Panel Outlines Keys for Hedge Fund Managers to Implement a Comprehensive Cybersecurity Program,” Hedge Fund Law Report, Vol. 8, No. 24 (Jun. 18, 2015).

Dechert Global Alternative Funds Symposium Highlights Portfolio Management and Global Trends for Private Equity and Real Estate Funds

As regulatory changes have forced private fund managers to evaluate the structures, strategies and marketing of their funds in the U.S., Europe and Asia, investment managers must also choose between active and passive management of their portfolios.  In addition, as AIFMD and other regulations have taken effect worldwide, managers of private equity and real estate funds need to reconsider the proper structures for their funds.  This article summarizes the discussion of the foregoing topics at the recent Dechert Alternative Funds Symposium in New York City.  For additional coverage of the Symposium, see “Dechert Global Alternative Funds Symposium Evaluates Liquid Alternative Funds and Fund Governance Trends,” Hedge Fund Law Report, Vol. 8, No. 25 (Jun. 25, 2015); and “Dechert Global Alternative Funds Symposium Highlights Trends in Hedge Fund Expense Allocations, Fees, Redemptions and Gates,” Hedge Fund Law Report, Vol. 8, No. 20 (May 21, 2015).

K&L Gates-IAA Panel Addresses Cyber Insurance Plans for Investment Advisers (Part Two of Two)

Investment managers must be prepared for cyber breaches, because even state-of-the-art cybersecurity measures can fail.  In addition to adopting a breach response plan, managers should consider purchasing insurance to mitigate their losses and response costs in the event of a breach.  Both of those approaches to mitigating the fallout from a cyber breach were recently considered in depth at a program sponsored by K&L Gates and the Investment Adviser Association (IAA).  The program – the fourth installment of the sponsors’ Investment Management Cybersecurity Seminar Series – was moderated by Mark C. Amorosi, a partner at K&L Gates, and featured Laura L. Grossman, assistant general counsel at the IAA; Jason Warmbir, a vice president at Willis Group Holdings Ltd.; and K&L Gates partners András P. Teleki and Gregory S. Wright.  This article, the second in a two-part series, discusses the availability of coverage for cyber breaches under conventional insurance policies; the availability and types of specialized cyber liability coverage; and coverage issues that may arise under such policies.  The first article explored the development and testing of a breach response plan; implementation of the plan in the event of a breach; breach notification requirements; and other post-breach actions.  For coverage of prior installments in the series, in which Amorosi, Grossman and Teleki also participated, see “K&L Gates-IAA Panel Provides Comprehensive Overview of Cybersecurity Laws and Threats Applicable to Investment Managers (Part One of Two),” Hedge Fund Law Report, Vol. 8, No. 16 (Apr. 23, 2015); and “K&L Gates-IAA Panel Addresses Regulatory Compliance and Practical Elements of Cybersecurity Testing (Part One of Two),” Hedge Fund Law Report, Vol. 8, No. 20 (May 21, 2015).

Jones Day Launches Luxembourg Fund Formation Practice in Paris with Arrival of Catherine Martougin

Jones Day recently announced the launch of a Luxembourg fund formation practice in Paris with the arrival of Catherine Martougin as a private equity practice partner in the firm’s Paris office.  See “How Can Hedge Fund Managers Use Luxembourg Funds to Access Investors and Investments in Europe, Asia and Latin America?,” Hedge Fund Law Report, Vol. 5, No. 27 (Jul. 12, 2012).  Martougin’s practice focuses on advising fund sponsors, managers, investment advisers and investors, particularly with respect to private equity, real estate, infrastructure, debt and other alternative investments within niche strategies.