Category Archives: Compliance

Compliance, Enforcement, Standard of Care

SEC’s Private Fund Risk Alert — Additional Deficiencies Found

February 11, 2022 Richard Chen Leave a comment

Signaling its increased scrutiny of private fund managers (including hedge, private equity, and venture capital fund managers), the SEC yesterday supplemented its June 23, 2020 Private Fund Risk Alert to identify additional deficiencies identified in recent examinations of such advisers which included the following:

Deficiencies in following disclosures in fund offering and other materials
Deficiencies pertaining to performance presentations and marketing
Deficiencies related to due diligence
Deficiencies pertaining to misleading hedge clauses in documents that purported to waive or limit the Advisers Act fiduciary duty except for certain exceptions, such as a non-appealable judicial finding of gross negligence, willful misconduct, or fraud which are currently found in almost all fund offering documents.

Hedge Clauses — Advisers Beware

February 11, 2022 Richard Chen Leave a comment

So cautions Richard Chen:

The SEC is taking aim at investment advisory contracts between the adviser and its clients, and many advisers may need to amend those contracts in light of the staff’s recent guidance where it takes the position that certain contract provisions designed to protect the adviser from liability constitute so-called “hedge clauses” that raise confusion as to whether the client is waiving its right to take action against an adviser provided under federal or state laws. The types of provisions can vary, but the SEC is particularly focused on claims where an adviser disclaims liability for its acts or omissions other than those that result from its gross negligence, willful misconduct, or bad faith.

Huckleberry FINRA and Life on the MissiSECippi: Mark Twain, FINRA, SEC, CFTC and NASAA Enforcement Actions (November and December 2021)

February 9, 2022 Clifford E. Kirsch, Editor Leave a comment

From Brian Rubin and Amanda C. Oliveira in this month’s column for NSCP Currents:

Samuel Langhorne Clemens, d/b/a Mark Twain, was the author of many outstanding (and often humorous) books and short stories that had good guys (e.g., Huck, Jim and Tom), bad guys (e.g., Pap Finn; the Duke and the Dauphin, who were the equivalent of the 19th century boiler room fraudsters), self-regulators (e.g., Aunt Polly and the Widow Douglas), an actual Judge (well, fictional, but you know what we mean) (Judge Thatcher, father of Becky), and sanctions (the Duke and the Dauphin are tarred and feathered – a bit different from being censured or ordered to cease and desist). In other words, his stories sound a lot like some of the securities enforcement cases we regularly read.

NFTs: A New Mechanism for Money Laundering… Uh Oh!

February 8, 2022 Ernest Badway Leave a comment

On February 4, 2022, the United States Treasury Department released a report that indicated non-fungible tokens (“NFTs”), currently, one of the trendiest cryptocurrency structures, may become a new avenue for money launderers and other nefarious ne’er do wells. Those interested in offering NFTs to the public may, ultimately, be required to inquire as to the purchasers of their NFTs. However, in the meantime and in consultation with securities counsel, it may not be a bad idea to start knowing who your customer is now.