The impact of U.S. v. Newman has already been felt in courtrooms across the country, as well as with respect to investigations that are no longer being pursued.  The Supreme Court’s recent denial of certiorari will provide no change to the gloomy landscape for prosecution of insider trading cases set in place by Newman.  In a guest article, the second in a two-part series, Dechert partners Robert J. Jossen and Michael J. Gilbert discuss a recent Ninth Circuit decision the government asserts conflicts with Newman and assess the problems that lie ahead for insider trading investigations and prosecutions in a post-Newman world.  The first article in the series analyzed the Newman decision and the government’s unsuccessful certiorari petition.  For more from Gilbert, see “The SEC’s Investigation of FCPA Violations and Sovereign Wealth Funds – Implications for Hedge Funds,” Hedge Fund Law Report, Vol. 4, No. 4 (Feb. 3, 2011).  For insight from Jossen, see “For Hedge Fund Managers in a Heightened Enforcement Environment, Internal Investigations Can Help Prevent or Mitigate Criminal and Civil Charges,” Hedge Fund Law Report, Vol. 2, No. 47 (Nov. 25, 2009).  The Hedge Fund Law Report and Dechert will be co-sponsoring a panel entitled “The Evolving Role of GCs and CCOs in Marketing and Investor Management in Europe” to be held in London on November 17, 2015.  For more information, click here.  To register, click here. Read full article …

The Financial Crimes Enforcement Network recently proposed a rule that would broaden the application of the Bank Secrecy Act’s suspicious activity reporting and anti-money laundering (AML) requirements to include investment advisers that are registered or required to be registered with the SEC.  The proposal would also include investment advisers in the general definition of “financial institution,” which, among other things, would require them to file currency transaction reports and keep records relating to the transmittal of funds.  See “Do Hedge Funds Really Pose a Money Laundering Threat?  A Decade of Regulatory False Starts Raises Questions,” Hedge Fund Law Report, Vol. 5, No. 7 (Feb. 16, 2012).  During Pepper Hamilton’s seminar, “Investment Management and Hedge Funds: What’s Happening Now?,” partners Gregory Nowak and Timothy McTaggart, as well as Walter Donaldson, managing director of Freeh Group International Solutions, LLC, outlined the basics of the proposed rule and its impact on the hedge fund industry.  This article, the first in a two-part series, summarizes the panelists’ discussion of the proposed rule and elements of an AML program that it would require.  The second article will discuss requirements with respect to reporting suspicious activity, information sharing and recordkeeping, as well as adoption and implementation of the rule.  For more from Nowak, see “Tax Proposals and Tax Reforms May Affect Rates and Impose Liabilities on Hedge Fund Managers,” Hedge Fund Law Report, Vol. 8, No. 15 (Apr. 16, 2015). Read full article …

The Undertakings for Collective Investment in Transferable Securities (UCITS) Directive has played a key role in the development of the European investment funds industry, creating a harmonized European framework to regulate investment funds that raise capital from the public.  Commonly known as “UCITS V,” the latest update of the UCITS Directive enacted in July 2014 will introduce reforms in three main areas: depositaries, remuneration and national sanction regimes.  The UCITS V Directive must be implemented by March 18, 2016.  In the U.K., while the Financial Conduct Authority is responsible for implementing changes to its rules pertaining to the more technical elements of the UCITS V Directive, the U.K. government’s economic and finance ministry – HM Treasury (HMT) – is responsible for transposing the more structural elements of the UCITS V Directive into national law.  This article outlines HMT’s proposals for transposing UCITS V into U.K. law and discusses the likely impact on the industry arising from compliance with the relevant provisions, as set out in a consultation paper published by HMT on October 23, 2015.  The proposals are directly applicable to fund managers currently managing UCITS funds or contemplating the launch of UCITS products in the future.  For more, see “FCA Consults on Implementation of UCITS V Provisions Applicable to Managers,” Hedge Fund Law Report, Vol. 8, No. 36 (Sep. 17, 2015); and “The Implications of UCITS IV Requirements for Asset Management Functions,” Hedge Fund Law Report, Vol. 4, No. 36 (Oct. 13, 2011). Read full article …

Business development companies (BDCs) are investment companies registered under the Investment Company Act of 1940 that invest primarily in the debt and equity securities of private U.S. operating companies.  On October 28, a panel of attorneys discussed nascent consolidation in the BDC industry and summarized the legal and practical considerations in a BDC consolidation.  The program, “Riding the BDC Consolidation Wave,” featured Dechert partners William J. Bielefeld, Thomas J. Friedmann, David J. Harris, William J. Tuttle, Jeffrey S. Sion and Kenneth E. Young.  Although the program focused on consolidation of BDCs, many of the legal requirements for a BDC consolidation may also apply to hedge fund managers that wish to consider BDCs as permanent capital vehicles or as a way to diversify revenue streams.  This article summarizes the key takeaways from the program.  For more from Dechert on BDCs, 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). Read full article …

A recent panel discussion at The Practising Law Institute’s Hedge Fund Management 2015 program, “Hot Topics for Hedge Fund Managers,” offered the perspective of an SEC counsel on cybersecurity and a summary of significant developments in swaps regulation, in addition to insight on current investor due diligence practices and a look at the challenges of starting a registered alternative fund.  Nora M. Jordan, a partner at Davis Polk & Wardwell, moderated the discussion, which featured Jessica A. Davis, chief operating officer and general counsel of investment adviser Lodge Hill Capital, LLC; Jennifer W. Han, associate general counsel at the Managed Funds Association; and Aaron Schlaphoff, an attorney fellow in the Rulemaking Office of the SEC Division of Investment Management.  This article summarizes the key takeaways from the program with respect to cybersecurity and swaps regulation.  For additional coverage of PLI’s Hedge Fund Management 2015 program, see “SEC’s Rozenblit Discusses Operations and Priorities of the Private Funds Unit,” Hedge Fund Law Report, Vol. 8, No. 37 (Sep. 24, 2015). Read full article …

The Risk and Examinations Office of the SEC Division of Investment Management recently released a compilation of Private Fund Statistics (Report) that provides data from filers of Form PF and Form ADV in 2013 and 2014.  In a recent speech, SEC Chair Mary Jo White said of the Report, “The public availability of aggregated information should help to address persistent questions, and to some degree misconceptions, about the practices and size of the private fund industry.”  Accordingly, the data in the Report helps identify trends within the hedge fund industry, allowing hedge fund advisers to benchmark themselves against their peers and competitors, as well as providing investors with information to refine their due diligence processes.  This article examines the Report, focusing particularly on data relevant to hedge funds and hedge fund advisers, including leverage and liquidity practices.  The SEC also issues an annual report on how it uses such data.  See “Report Describes the SEC’s Use of Form PF for Hedge Fund Manager Examination Targeting and Risk Management,” Hedge Fund Law Report, Vol. 7, No. 38 (Oct. 10, 2014); and “SEC’s First Report on Initial Form PF Filings Offers Insight into How the Agency Is Using the Collected Data for Examinations, Enforcement and Systemic Risk Monitoring,” Hedge Fund Law Report, Vol. 6, No. 34 (Aug. 29, 2013). Read full article …

Kramer Levin Naftalis & Frankel recently announced that Kevin P. Scanlan has joined the firm as a partner in the corporate department.  Scanlan advises clients on structuring, forming and investing in international and domestic private investment funds, including hedge funds, private equity funds, real estate funds, venture capital funds and funds of funds.  He also advises funds in connection with their subsequent investment activities.  For insight from Kramer Levin, see “‘Interval Alts’ Combine Benefits of Alternative Mutual Funds and Traditional Hedge Funds,” Hedge Fund Law Report, Vol. 8, No. 28 (Jul. 16, 2015); and “Risks Faced by Hedge Fund Managers That Access the Alternative Mutual Fund Market Via Turnkey Platforms,” Hedge Fund Law Report, Vol. 7, No. 10 (Mar. 13, 2014). Read full article …

On November 2, 2015, Appleby welcomed new partner Sailaja Alla to its Cayman funds practice.  Returning to Appleby having spent seven years with the firm from 2000-2007 in Cayman and Hong Kong, she specializes in the formation, maintenance and restructuring of a range of investment funds utilizing corporate, partnership and unit trust structures.  For insight from Appleby partners, see “Cayman Islands Decision Highlights Three Questions That May Affect the Enforceability of Fund Side Letters,” Hedge Fund Law Report, Vol. 8, No. 21 (May 28, 2015); and “How Can Investors in Cayman Hedge Funds Maximize Protection of Their Investments When the Fund Is Near or At the End of Its Life? (Part Two of Two),” Hedge Fund Law Report, Vol. 6, No. 47 (Dec. 12, 2013). Read full article …