In the past two years, cybersecurity has become a leading buzzword – if not the leading buzzword – in the hedge fund compliance community.  In recent months, the cyber focus has become even more intense for the hedge fund industry, as every week seems to bring a new major cyber regulatory development.  Consequently, keeping up with cyber compliance news is challenging for hedge fund compliance personnel.  Regulators have done a tremendous job of sharing principles-based guidance with the compliance community, clarifying regulatory expectations to assist firms with respect to cybersecurity.  In a guest article, the first in a two-part series, Moshe Luchins, the deputy general counsel and compliance officer of Zweig-DiMenna Associates LLC, provides hedge fund compliance professionals with an outline of the regulatory expectations in the area of cybersecurity.  The second article will provide hedge fund managers with a practical blueprint to build a cyber-compliance program.  For more on cybersecurity, see “PLI ‘Hot Topics’ Panel Addresses Cybersecurity and Swaps Regulation,” Hedge Fund Law Report, Vol. 8, No. 43 (Nov. 5, 2015); and “K&L Gates-IAA Panel Addresses Regulatory Compliance and Practical Elements of Cybersecurity Testing (Part Two of Two),” Hedge Fund Law Report, Vol. 8, No. 21 (May 28, 2015). Read full article …

Many non-E.U. fund managers have hesitated to market their funds into the E.U. since the Alternative Investment Fund Managers Directive (AIFMD) took effect, because of national private placement regime (NPPR) requirements of each country in which the manager wants to market.  Non-E.U. managers have been concerned about potentially burdensome and disparate registration and reporting requirements.  A recent program presented by Advise Technologies sought to dispel some of those concerns and offered insights into how the NPPRs function in practice.  The program, “Non-E.U. Fund Managers: Why AIFMD Is Easier Than You Think,” was moderated by William V. de Cordova, Editor-in-Chief of the Hedge Fund Law Report, and featured Bill Prew, Founder and CEO of INDOS Financial; Tim Slotover, Founder and Director of flexGC; Jeanette Turner, Managing Director and General Counsel of Advise Technologies; and Arne Zeidler, Founder and Managing Director of Zeidler Legal Services.  This article, the first in a two-part series, summarizes the key takeaways from the program with respect to initial entry requirements, pre-investment disclosures and annual reporting requirements under the NPPRs.  The second article will address regulatory reporting requirements and the evolution of marketing under the NPPRs.  For more from Slotover, Turner and Zeidler on the AIFMD, see “AIFMD Is Easier for Non-E.U. Hedge Fund Managers Than Commonly Anticipated,” Hedge Fund Law Report, Vol. 8, No. 41 (Oct. 22, 2015).  For more on marketing funds into the E.U., see “Passports, Platforms and Private Placement: Options for Marketing Funds in Europe in the Post-AIFMD Era,” Hedge Fund Law Report, Vol. 8, No. 17 (Apr. 30, 2015); “Navigating the Patchwork of National Private Placement Regimes: A Roadmap for Marketing in Europe by Non-E.U. Hedge Fund Managers That Are Not Authorized Under the AIFMD,” Hedge Fund Law Report, Vol. 7, No. 28 (Jul. 24, 2014); and “Four Strategies for Hedge Fund Managers for Accessing E.U. Capital Under the AIFMD,” Hedge Fund Law Report, Vol. 7, No. 6 (Feb. 13, 2014). Read full article …

The SEC continues to pursue enforcement actions for major, as well as minor, infractions.  See our two-part series on the SEC’s “Broken Windows” Approach: Part One, Vol. 8, No. 37 (Sep. 24, 2015); and Part Two, Vol. 8, No. 38 (Oct. 1, 2015).  In this environment, hedge fund managers need to ensure they have sufficient compliance programs in place to guard against violations and ward off potential SEC actions.  Additionally, the financial services industry remains a prominent focus for Foreign Corrupt Practices Act (FCPA) enforcement, and the FCPA is becoming a more significant part of hedge fund compliance programs, particularly for those that invest or market globally.  For more, see “FCPA Compliance Strategies for Hedge Fund and Private Equity Fund Managers,” Hedge Fund Law Report, Vol. 7, No. 23 (Jun. 13, 2014).  Speakers at Corporate Counsel’s Ninth Annual Hedge Fund General Counsel and Compliance Officer Summit addressed the foregoing, illustrating elements of a robust compliance program and addressing FCPA requirements.  This article summarizes those panel discussions.  For additional coverage of the Summit, see “ALM General Counsel Summit Reveals How Hedge Fund Managers Can Prepare for SEC Examinations,” Hedge Fund Law Report, Vol. 8, No. 45 (Nov. 19, 2015). Read full article …

The Markets in Financial Instruments Directive recast under the new directive (MiFID II) and related regulations (MiFIR) are currently scheduled to take effect in January 2017, and hedge fund managers trading in Europe will need to be prepared for the accompanying significant changes to the environment.  See “FCA Urges Hedge Fund Managers to Prepare for MiFID II,” Hedge Fund Law Report, Vol. 8, No. 42 (Oct. 29, 2015).  However, the European Securities and Markets Authority (ESMA) recently concluded that a number of “technically complex elements envisaged in MiFID will not be operational by the time that MiFID II will become applicable.”  Citing the need for a full overhaul (by industry supervisors as well as ESMA) of systems under MiFID I and the fact that the technical rules that shape those systems will only become effective a few months prior to January 2017, ESMA has offered several proposals for delaying the effective date for MiFID II and MiFIR.  This article discusses ESMA’s rationale for the delay and its proposals, as well as the European Parliament’s MiFID II negotiating team’s response.  For more on MiFID II and MiFIR, see “MiFID II Expands MiFID I and Imposes Reporting Requirements on Asset Managers, Including Non-E.U. Asset Managers,” Hedge Fund Law Report, Vol. 8, No. 21 (May 28, 2015); and our two-part coverage of Simmons & Simmons and Advise Technologies’ Comprehensive Overview of MiFID II: Part One, Vol. 8, No. 24 (Jun. 18, 2015); and Part Two, Vol. 8, No. 25 (Jun. 25, 2015). Read full article …

In 2014, Valeant Pharmaceuticals, in cooperation with one of William Ackman’s Pershing Square funds, launched an ultimately unsuccessful tender offer to take over Allergan, Inc.  In December 2014, Valeant and its CEO, Michael Pearson, together with Ackman and several Pershing Square entities, were named as defendants in a private class action lawsuit that seeks to recover damages from them on behalf of Allergan shareholders who sold Allergan stock while the tender offer was pending.  The suit claims that, in violation of federal tender offer rules, the defendants failed to disclose material information about the Allergan tender offer while the Pershing Square fund was acquiring a substantial position in Allergan.  The court recently ruled on the defendants’ motion to dismiss the complaint.  This article summarizes the key factual allegations and legal claims in the plaintiffs’ complaint and the court’s reasoning.  Separately, Allergan had commenced an action against Valeant and the other defendants to challenge the takeover.  That action became moot when Valeant withdrew its bid.  For more on the Allergan-Valeant litigation, see “Top SEC Officials, Law Firm Partners and In-House Counsel Discuss Private Fund Enforcement Priorities, Tender Offer Rules Applicable to Activist Investing, Valuation Challenges, Personal Trade Monitoring and Compliance Testing (Part Four of Four),” Hedge Fund Law Report, Vol. 8, No. 3 (Jan. 22, 2015); and “Did Pershing Square and Valeant Violate Insider Trading, Antitrust or Tender Offer Rules in Their Pursuit of Allergan?,” Hedge Fund Law Report, Vol. 7, No. 17 (May 2, 2014). Read full article …

Ernst & Young (EY) recently released the results of its 2015 Global Hedge Fund and Investor Survey, entitled “The Evolving Dynamics of the Hedge Fund Industry.”  EY explored fund managers’ perspectives on growth priorities, fees and expenses, prime brokerage fees, cash management, technology and outsourcing.  It also examined investors’ perspectives on sourcing non-traditional hedge fund products through hedge fund managers, fund fees, expense allocations and outsourcing.  This article summarizes the survey’s key findings.  For coverage of EY’s 2014 survey, see “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,” Hedge Fund Law Report, Vol. 8, No. 2 (Jan. 15, 2015).  For coverage of EY surveys from prior years, see the 2013 survey, Vol. 6, No. 46 (Dec. 5, 2013); 2012 survey, Vol. 5, No. 44 (Nov. 21, 2012); 2011 survey, Vol. 5, No. 1 (Jan. 5, 2012); and 2009 survey, Vol. 2, No. 46 (Nov. 19, 2009). Read full article …

Kramer Levin Naftalis & Frankel recently announced that fund formation lawyers Darina F. Delappe and Caroline A. Levin have joined the firm as senior counsel and associate, respectively, in its corporate department.  Delappe focuses her practice on fund formation, particularly ongoing management and restructuring of international and domestic private investment funds, including hedge funds, private equity funds, venture capital funds, funds of funds and hybrid funds.  Levin focuses her practice on financial services matters, representing private investment fund clients in the formation and ongoing management of private investment funds.  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 …