Private Investment Funds

On February 13, US Senators Chuck Grassley, Thom Tillis, John Cornyn and Ben Sasse, all members of the Senate Judiciary Committee, introduced legislation requiring disclosure of third-party litigation financing agreements to the court and named parties to (1) any class action lawsuit filed in federal court, and (2) any claim that is aggregated into a federal multi-district litigation proceeding. Currently, the existence and terms of third-party litigation financing agreements, whereby hedge funds and other lenders finance the cost of civil litigation with the expectation of sharing in a portion of any recovery, are rarely disclosed to the court or opposing parties, creating the potential for conflicts of interest.
Continue Reading Sen. Chuck Grassley Leads Effort to Improve Transparency of Third-Party Financing in Civil Litigation

On August 31, the US Department of Labor proposed an 18-month extension of the full implementation of the Best Interest Contract Exemption and other related exemptions issued under the ERISA fiduciary rule.  Under existing guidance, a fiduciary may comply with the exemptions by adhering to an abbreviated set of requirements referred to as the “impartial

Section 205 under the Investment Advisers Act of 1940 generally prohibits a federally registered investment adviser (RIA) from receiving compensation based on a share of the capital gains on or appreciation of the assets of an advisory client (i.e., performance fees). Rule 205-3 under the Advisers Act provides an exemption from this prohibition for clients that meet the definition of “Qualified Client” found in the rule.
Continue Reading SEC Increases Dollar Amount of the Net Worth Threshold Test for ‘Qualified Clients’ in Rule 205-3 Under the Investment Advisers Act of 1940

On October 20, the European Securities and Markets Authority (ESMA) published the responses received to its consultation on Draft Regulatory Technical Standards (draft RTS) under Regulation (EU) 2015/760 (ELTIF Regulation). 
Continue Reading ESMA Publishes Responses to the Consultation on Draft RTS Under the ELTIF Regulation

On July 21, the European Securities and Markets Authority (ESMA) published an updated questions and answers (“Updated Q&A”) on the application on the Alternative Investment Fund Managers Directive (AIFMD). The Updated Q&A includes new information on reporting to national competent authorities and the calculation of the total value of assets under management (AUM), as discussed below.
Continue Reading ESMA Updates Q&A on the AIFMD

On June 29, the Securities and Exchange Commission charged Kohlberg Kravis Roberts & Co. (KKR) with violations of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940, as amended, and Rule 206(4)-7 thereunder for the misallocation of broken deal expenses. The charge addressed KKR’s failure to disclose in its flagship funds’ offering materials that it did not attribute broken deal expenses to co-investor funds.
Continue Reading SEC Enforcement Action Signifies the Need for Investment Advisers to Adopt Written Expense Allocation Policies

Every five years, the Bureau of Economic Analysis of the US Department of Commerce (BEA) conducts a survey concerning the extent of investment abroad by US individuals and entities (US persons). In the past, only US persons specifically requested to do so by the BEA were required to respond to the survey by filing a BE-10 report. This year, however, each US person who had a foreign affiliate (as described below) at any time during its 2014 fiscal year is required to file the report.
Continue Reading Form BE-10 Filing Deadline Looms

On April 22, the European Securities and Markets Authority (ESMA) issued a call for information (Call for Evidence) on virtual currency. Unlike recent studies performed by the European Banking Authority and HM Treasury, ESMA is not calling for comment on virtual currencies as a payment technology or alternative form of money. In particular, ESMA is requesting information on three topics: 1) virtual currency investment products; 2) virtual currency based assets, securities and asset transfers; and 3) the application of distributed ledger technology to securities and investments. The Call for Evidence states that ESMA has been monitoring and analyzing virtual currency investment over the last six months to understand the developments in the market, the risk and benefits for investors, and the impact on market integrity and financial stability.
Continue Reading ESMA Issues Call for Evidence on Virtual Currency