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Category Archives: hedge fund regulation

Private Equity Firms Charged with Disclosure Failures

October 7, 2015 Dear Friends, Today, the SEC announced that three private equity advisers agreed to pay nearly $39 million to settle charges they failed to make adequate disclosures to investors. According to the SEC, the advisers failed to adequately disclose the acceleration of monitoring fees paid by fund-owned portfolio companies, prior to the companies’ sale or initial public offering. […]

Supreme Court Denies Request to Hear Newman Case

October 5, 2015 Dear Friends, Today, the U.S. Supreme Court officially refused to hear the United States v. Newman insider trading decision. By way of background: In December 2012, Todd Newman and Anthony Chiasson were convicted of securities fraud and sentenced to prison after their trades in certain stocks, allegedly based on a chain of material non-public information, resulted in […]

SEC Charges Attorneys and Accountant with Insider Trading

September 29, 2015 Dear Friends, The SEC alleges that two lawyers and an accountant illegally traded on confidential information, misappropriated during a meeting with a mutual client to discuss personal matters, as outlined below. During a meeting to discuss personal end-of-year tax and estate planning matters, a board member of a pharmaceutical company (and a mutual client of the attorneys […]

SEC Charges IA with Cybersecurity Failures

September 23, 2015 Dear Friends, The SEC announced that an investment adviser agreed to settle charges that it failed to establish required cybersecurity policies and procedures, to ensure the security and confidentiality of personally identifiable information (PII). The firm stored PII of approximately 100,000 individuals on a third party hosted web server, which was hacked in 2013. Following the attack, […]

SEC Announces 2nd Round of Cybersecurity Exams

September 16, 2015 Dear Friends, The SEC announced it will conduct a second round of cybersecurity examinations and released a sample list of information that the Office of Compliance Inspections and Examinations may review in the context of conducting examinations. Governance and Risk Assessment: Examiners may assess whether registrants have cybersecurity governance and risk assessment processes in the areas outlined […]

SEC Charges HF With Taking Unearned Management Fees

September 8, 2015 Dear Friends, A Seattle based hedge fund agreed to pay disgorgement of over $800,000, after being charged by the SEC with fraudulently inflating the value of its investments, in order to attain unearned management fees. The SEC also charged the fund’s outside auditors with performing a deficient audit, enabling the firm to send misleading financial statements to […]

Suggestive Phrases = Red Flags for Regulators

Dear Friends, A Bloomberg article highlights how the use of certain suggestive phrases in electronic communications can be red flags for regulators. Phrases like TYOP (tell you on phone), TOL (talk off line), and LDL (let’s discuss live) are red flags. “Investigators for the SEC and Justice Department get so many e-mails they can’t possibly review them all without using Control-F….they […]

NFA Issues Cybersecurity Guidance

Dear Friends, The NFA issued an interpretive notice, subject to CFTC approval, outlining general requirements relating to members’ information systems security practices (“ISSP”). The NFA’s notice provides guidance regarding ISSPs that each member should develop and customize, including the following: Written Policies and Procedures Security and Risk Analysis Development of Protective Measures Against Threats and Vulnerabilities Response and Recovery Employee Training […]

FinCEN Proposes AML Rule for RIAs

Dear Friends, Yesterday FinCEN proposed a rule, enforceable by the SEC: Requiring certain registered investment advisers to establish anti-money laundering (AML) programs; and Including investment advisers within the general definition of a “financial institution” pursuant to the Bank Secrecy Act (BSA), subjecting them to BSA requirements, including compliance with: Filing Currency Transaction Reports and record keeping requirements relating to the transmittal […]

Hedge Funds Agree to $180 Million SEC Settlement

August 18, 2015 Dear Friends, The SEC announced that two asset managers agreed to pay $180 million to settle charges that they defrauded investors and failed to implement policies and procedures to prevent employees from making contradictory and false representations. According to the SEC, the hedge funds in question were highly leveraged, yet employees made misleading representations- assuring investors that […]