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Investment Fund Law Blog: Updates and insights on legal issues for fund managers and investors
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Jay B. Gould
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1/9/2012
SEC Focuses on Investment Advisers’ Use of Social Media
Authors: Jay B. Gould, Ildiko Duckor, Peter J. Chess
On January 4, 2012, the Securities and Exchange Commission (SEC) released a National Examination Risk Alert addressing investment adviser use of social media. Investment advisers should have policies regarding the use of social media, and the SEC outlined specific factors that need to be addressed by these policies. The SEC’s guidance could be particularly important given the “crowdfunding” legislation Congress is currently considering.
SEC Focuses on Investment Advisers’ Use of Social Media
Authors: Jay B. Gould, Ildiko Duckor, Peter J. Chess
On January 4, 2012, the Securities and Exchange Commission (SEC) released a National Examination Risk Alert addressing investment adviser use of social media. Investment advisers should have policies regarding the use of social media, and the SEC outlined specific factors that need to be addressed by these policies. The SEC’s guidance could be particularly important given the “crowdfunding” legislation Congress is currently considering.
10/28/2011
SEC Approves Confidential Private Fund Systemic Risk Reporting
Author: Jay B. Gould
On October 26, 2011, the SEC adopted a new rule requiring SEC-registered advisers to hedge funds and other private funds with at least $150 million in private fund assets under management to report information to the Financial Stability Oversight Council (FSOC) to enable it to monitor risk to the U.S. financial system. The information which must be reported to the FSOC on Form PF will remain confidential, and not accessible to the general public.
SEC Approves Confidential Private Fund Systemic Risk Reporting
Author: Jay B. Gould
On October 26, 2011, the SEC adopted a new rule requiring SEC-registered advisers to hedge funds and other private funds with at least $150 million in private fund assets under management to report information to the Financial Stability Oversight Council (FSOC) to enable it to monitor risk to the U.S. financial system. The information which must be reported to the FSOC on Form PF will remain confidential, and not accessible to the general public.
7/26/2010
Dodd-Frank Act Implications for Investment Advisers to Private Funds
Authors: Jay B. Gould, Michael G. Wu
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) will significantly change the regulatory regime governing investment advisers, particularly investment advisers to private funds, such as hedge funds and private equity funds. The primary purpose of the new rules and requirements is to “fill the regulatory gap,” by requiring advisers to private funds to register as investment advisers with the Securities and Exchange Commission (SEC) or state securities regulators, unless an exemption applies, and provide information about their activities to the SEC.
Dodd-Frank Act Implications for Investment Advisers to Private Funds
Authors: Jay B. Gould, Michael G. Wu
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) will significantly change the regulatory regime governing investment advisers, particularly investment advisers to private funds, such as hedge funds and private equity funds. The primary purpose of the new rules and requirements is to “fill the regulatory gap,” by requiring advisers to private funds to register as investment advisers with the Securities and Exchange Commission (SEC) or state securities regulators, unless an exemption applies, and provide information about their activities to the SEC.
7/22/2010
ETF Ownership Limits—Trap for the Unwary Hedge Fund
Authors: Jay B. Gould, Ildiko Duckor, Michael G. Wu, Clint A. Keller
In recent years, many hedge funds have significantly increased their holdings in exchange-traded funds (ETFs). Historically, hedge funds primarily acquired short positions in ETFs to hedge their long positions in a particular industry segment by obtaining short exposure to an entirely different industry segment. However, many hedge funds are now acquiring long positions in ETFs as part of their core investment strategies. Hedge funds and their managers should be aware that substantially increasing their long positions in ETFs could result in such hedge funds violating the ownership limit set forth in Section 12(d)(1)(A)(i) of the Investment Company Act of 1940 (the Investment Company Act). Although Section 12(d)(1)(A)’s limitations apply to investments in any registered investment company, including closed-end funds, the discussion below focuses on ETFs due to their popularity as a component of the investment strategies of hedge fund managers.
ETF Ownership Limits—Trap for the Unwary Hedge Fund
Authors: Jay B. Gould, Ildiko Duckor, Michael G. Wu, Clint A. Keller
In recent years, many hedge funds have significantly increased their holdings in exchange-traded funds (ETFs). Historically, hedge funds primarily acquired short positions in ETFs to hedge their long positions in a particular industry segment by obtaining short exposure to an entirely different industry segment. However, many hedge funds are now acquiring long positions in ETFs as part of their core investment strategies. Hedge funds and their managers should be aware that substantially increasing their long positions in ETFs could result in such hedge funds violating the ownership limit set forth in Section 12(d)(1)(A)(i) of the Investment Company Act of 1940 (the Investment Company Act). Although Section 12(d)(1)(A)’s limitations apply to investments in any registered investment company, including closed-end funds, the discussion below focuses on ETFs due to their popularity as a component of the investment strategies of hedge fund managers.
4/5/2010
U.S. Supreme Court Adopts Gartenberg Standard for Mutual Fund Advisers’ Fees
High Court Clarifies When Advisers May be Liable to Investors for Excessive Fees Under Section 36(b) of the Investment Company Act of 1940
Authors: Bruce A. Ericson, Jay B. Gould, Andrew D. Lanphere, Alex Santana
On March 30, 2010, the Supreme Court resolved a split among the courts of appeals regarding the standard for liability under Section 36(b) of the Investment Company Act of 1940, 15 U.S.C. Section 80a-35(b), which imposes on mutual fund investment advisers a “fiduciary duty with respect to the receipt of compensation for services” and provides mutual fund investors with a private cause of action if advisers breach that fiduciary duty by charging excessive fees. Jones v. Harris Associates, L.P., No. 08-586 (Mar. 30, 2010).
U.S. Supreme Court Adopts Gartenberg Standard for Mutual Fund Advisers’ Fees
High Court Clarifies When Advisers May be Liable to Investors for Excessive Fees Under Section 36(b) of the Investment Company Act of 1940
Authors: Bruce A. Ericson, Jay B. Gould, Andrew D. Lanphere, Alex Santana
On March 30, 2010, the Supreme Court resolved a split among the courts of appeals regarding the standard for liability under Section 36(b) of the Investment Company Act of 1940, 15 U.S.C. Section 80a-35(b), which imposes on mutual fund investment advisers a “fiduciary duty with respect to the receipt of compensation for services” and provides mutual fund investors with a private cause of action if advisers breach that fiduciary duty by charging excessive fees. Jones v. Harris Associates, L.P., No. 08-586 (Mar. 30, 2010).
1/28/2010
Amendments to Custody Rule for SEC Registered Investment Advisers
Authors: Jay B. Gould, Ildiko Duckor, Michael G. Wu, Clint A. Keller
On December 30, 2009, the SEC published the adopting release and text of new amendments to Rule 206(4)-2 (the “Custody Rule” and, as amended, the “Amended Custody Rule”) and related forms and rules (including recordkeeping rules) under the Investment Advisers Act of 1940. Originally proposed in May 2009, the new amendments will be effective on March 12, 2010.
Amendments to Custody Rule for SEC Registered Investment Advisers
Authors: Jay B. Gould, Ildiko Duckor, Michael G. Wu, Clint A. Keller
On December 30, 2009, the SEC published the adopting release and text of new amendments to Rule 206(4)-2 (the “Custody Rule” and, as amended, the “Amended Custody Rule”) and related forms and rules (including recordkeeping rules) under the Investment Advisers Act of 1940. Originally proposed in May 2009, the new amendments will be effective on March 12, 2010.
11/2/2009
Navigating Recent Regulatory Changes That Encourage Foreign-Invested RMB Funds in China
Authors: Jay B. Gould, Michael G. Wu, Joseph W. K. Chan, Clint A. Keller, Judy Deng
Several changes this year in China's regulation of foreign-invested RMB funds have made it easier and more appealing for foreign venture capital and private equity investors to pursue opportunities within China. This client advisory provides a summary of the most significant changes.
Navigating Recent Regulatory Changes That Encourage Foreign-Invested RMB Funds in China
Authors: Jay B. Gould, Michael G. Wu, Joseph W. K. Chan, Clint A. Keller, Judy Deng
Several changes this year in China's regulation of foreign-invested RMB funds have made it easier and more appealing for foreign venture capital and private equity investors to pursue opportunities within China. This client advisory provides a summary of the most significant changes.
10/22/2009
California Adopts "Pay-to-Play" Restrictions
Authors: Jay B. Gould, Kimberly V. Mann, Dulcie D. Brand, Ildiko Duckor, Michael G. Wu, Clint A. Keller
On October 11, California became the latest state to implement reforms designed to prevent placement agents from using campaign contributions, gifts, employment opportunities and other incentives to influence investment decisions by public pensions. In contrast to reforms adopted in Illinois, New Mexico and New York and proposed by the SEC, which to varying degrees prohibit the use of placement agents, Assembly Bill 1584 seeks to curb "pay-to-play" activities by requiring expanded disclosure by placement agents and asset management firms and restricting the ability of public pension employees to engage in self-interested transactions or act as lobbyists. AB 1584 goes into effect immediately but some disclosure requirements may not be fully implemented until June 30, 2010.
California Adopts "Pay-to-Play" Restrictions
Authors: Jay B. Gould, Kimberly V. Mann, Dulcie D. Brand, Ildiko Duckor, Michael G. Wu, Clint A. Keller
On October 11, California became the latest state to implement reforms designed to prevent placement agents from using campaign contributions, gifts, employment opportunities and other incentives to influence investment decisions by public pensions. In contrast to reforms adopted in Illinois, New Mexico and New York and proposed by the SEC, which to varying degrees prohibit the use of placement agents, Assembly Bill 1584 seeks to curb "pay-to-play" activities by requiring expanded disclosure by placement agents and asset management firms and restricting the ability of public pension employees to engage in self-interested transactions or act as lobbyists. AB 1584 goes into effect immediately but some disclosure requirements may not be fully implemented until June 30, 2010.
8/17/2009
2008 and Prior Years’ FBAR Filing Deadlines Extended for Certain Persons to June 30, 2010
Authors: Timothy P. Burns, Ildiko Duckor, Jay B. Gould, Susan P. Serota, Michael G. Wu, Clint A. Keller
The IRS announced Friday, August 7th in Notice 2009-62 that it is extending the Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts) filing deadlines for the 2008 and earlier calendar years until June 30, 2010 for (i) persons with signature authority over, but no financial interest in, a foreign financial account; and (ii) persons with a financial interest in, or signature authority over, a foreign commingled fund. Notice 2009-62 indicates that the Department of Treasury intends to issue regulations clarifying the FBAR filing requirements with respect to foreign financial accounts. This, for now, delays and may, in the future, even relieve certain of the above categories of persons of perceived filing obligations that were based on previously ambiguous IRS guidance.
2008 and Prior Years’ FBAR Filing Deadlines Extended for Certain Persons to June 30, 2010
Authors: Timothy P. Burns, Ildiko Duckor, Jay B. Gould, Susan P. Serota, Michael G. Wu, Clint A. Keller
The IRS announced Friday, August 7th in Notice 2009-62 that it is extending the Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts) filing deadlines for the 2008 and earlier calendar years until June 30, 2010 for (i) persons with signature authority over, but no financial interest in, a foreign financial account; and (ii) persons with a financial interest in, or signature authority over, a foreign commingled fund. Notice 2009-62 indicates that the Department of Treasury intends to issue regulations clarifying the FBAR filing requirements with respect to foreign financial accounts. This, for now, delays and may, in the future, even relieve certain of the above categories of persons of perceived filing obligations that were based on previously ambiguous IRS guidance.
8/6/2009
SEC Proposes Restrictions on “Pay to Play” Practices
Authors: Jay B. Gould, Kimberly V. Mann, Dulcie D. Brand, Ildiko Duckor, Michael G. Wu, Clint A. Keller
Expressing concern that the allocation of public pension and other government plan assets to investment advisers is being influenced by political contributions paid by investment advisers to public officials, the Securities and Exchange Commission on August 3 proposed comprehensive regulations designed to prevent such "pay to play" activities. The rules are closely modeled on Rules G-37 and G-38 of the Municipal Securities Rulemaking Board, which the SEC believes effectively addressed pay to play practices in the municipal securities market.
SEC Proposes Restrictions on “Pay to Play” Practices
Authors: Jay B. Gould, Kimberly V. Mann, Dulcie D. Brand, Ildiko Duckor, Michael G. Wu, Clint A. Keller
Expressing concern that the allocation of public pension and other government plan assets to investment advisers is being influenced by political contributions paid by investment advisers to public officials, the Securities and Exchange Commission on August 3 proposed comprehensive regulations designed to prevent such "pay to play" activities. The rules are closely modeled on Rules G-37 and G-38 of the Municipal Securities Rulemaking Board, which the SEC believes effectively addressed pay to play practices in the municipal securities market.
6/24/2009
Revised TD F 90-22.1: Report of Foreign Bank and Financial Accounts
NOTE: Information in this Alert is now superseded. Please see "2008 and Prior Years' FBAR Filing Deadlines Extended for Certain Persons to June 30, 2010."
Authors: Ildiko Duckor, Jay B. Gould, Michael G. Wu, Clint A. Keller
An obligation to file a Report of Foreign Bank and Financial Accounts ("FBAR") currently applies to any United States person who has a financial interest in or signature or other authority over any financial accounts in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year. The filing deadline is June 30, 2009.
Revised TD F 90-22.1: Report of Foreign Bank and Financial Accounts
NOTE: Information in this Alert is now superseded. Please see "2008 and Prior Years' FBAR Filing Deadlines Extended for Certain Persons to June 30, 2010."
Authors: Ildiko Duckor, Jay B. Gould, Michael G. Wu, Clint A. Keller
An obligation to file a Report of Foreign Bank and Financial Accounts ("FBAR") currently applies to any United States person who has a financial interest in or signature or other authority over any financial accounts in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year. The filing deadline is June 30, 2009.
3/3/2009
China RMB Funds: The Far East Is Closer Than You Think
Authors: Jay B. Gould, Greg L. Pickrell, Michael G. Wu, Clint A. Keller, Judy Deng
As the U.S. economy continues to struggle, U.S. private equity and venture capital fund sponsors may want to consider investment opportunities outside of the U.S. Although the global financial crisis has generally affected all countries, China has been relatively insulated from much of the housing, credit and financial crises that have devastated the U.S. and European financial markets. Further, China, which surpassed Germany in 2007 to become the world's third largest economy, expects to meet its growth target of 8% in 2009. As a result, China remains one of the few countries that may still offer attractive opportunities for private equity and venture capital investments.
China RMB Funds: The Far East Is Closer Than You Think
Authors: Jay B. Gould, Greg L. Pickrell, Michael G. Wu, Clint A. Keller, Judy Deng
As the U.S. economy continues to struggle, U.S. private equity and venture capital fund sponsors may want to consider investment opportunities outside of the U.S. Although the global financial crisis has generally affected all countries, China has been relatively insulated from much of the housing, credit and financial crises that have devastated the U.S. and European financial markets. Further, China, which surpassed Germany in 2007 to become the world's third largest economy, expects to meet its growth target of 8% in 2009. As a result, China remains one of the few countries that may still offer attractive opportunities for private equity and venture capital investments.
2/18/2009
Congress Takes Aim At Hedge Fund Industry
Authors: Jay B. Gould, Michael G. Wu, Clint A. Keller
The final days of January saw the introduction of bills in both the Senate and the House of Representatives that would significantly expand the regulation of hedge funds and their advisers. As these bills were introduced by individual Congressmen rather than originating in the House Committee on Financial Services or the Senate Committee on Banking, Housing and Urban Affairs, it is doubtful that they will receive serious consideration within their respective legislative bodies. Regardless, these proposals are noteworthy as evidence of the growing impetus for regulation of the hedge fund industry and illustrate the concerns and priorities of the regulators and other interest groups advocating such measures.
Congress Takes Aim At Hedge Fund Industry
Authors: Jay B. Gould, Michael G. Wu, Clint A. Keller
The final days of January saw the introduction of bills in both the Senate and the House of Representatives that would significantly expand the regulation of hedge funds and their advisers. As these bills were introduced by individual Congressmen rather than originating in the House Committee on Financial Services or the Senate Committee on Banking, Housing and Urban Affairs, it is doubtful that they will receive serious consideration within their respective legislative bodies. Regardless, these proposals are noteworthy as evidence of the growing impetus for regulation of the hedge fund industry and illustrate the concerns and priorities of the regulators and other interest groups advocating such measures.
11/10/2008
SEC Seeks to Regulate Credit Default Swaps
Authors: Jay B. Gould, Michael G. Wu, Clint A. Keller
Recent statements by SEC Chairman Christopher Cox and other SEC officials have demonstrated the agency’s commitment to bringing credit default swaps within its regulatory purview and provide a glimpse of the rules and regulations that the SEC is likely to implement if Congress responds to its requests for greater authority.
SEC Seeks to Regulate Credit Default Swaps
Authors: Jay B. Gould, Michael G. Wu, Clint A. Keller
Recent statements by SEC Chairman Christopher Cox and other SEC officials have demonstrated the agency’s commitment to bringing credit default swaps within its regulatory purview and provide a glimpse of the rules and regulations that the SEC is likely to implement if Congress responds to its requests for greater authority.
10/06/2008
FASB Proposes Amendments to Fair Value Measurement Guidance
Authors: Jay B. Gould, Michael G. Wu, Terry Davis, Clint A. Keller
On October 3, 2008, the Financial Accounting Standards Board (“FASB”) proposed amendments to FASB Statement No. 157, Fair Value Measurements (“FAS 157”) in order to clarify the application of FAS 157 in inactive markets and provide an illustrative example of how the fair value of a financial asset is determined when the market for the financial asset is inactive. The amendment incorporates the guidance issued on September 30, 2008 in a joint press release by the FASB and the Securities and Exchange Commission.
FASB Proposes Amendments to Fair Value Measurement Guidance
Authors: Jay B. Gould, Michael G. Wu, Terry Davis, Clint A. Keller
On October 3, 2008, the Financial Accounting Standards Board (“FASB”) proposed amendments to FASB Statement No. 157, Fair Value Measurements (“FAS 157”) in order to clarify the application of FAS 157 in inactive markets and provide an illustrative example of how the fair value of a financial asset is determined when the market for the financial asset is inactive. The amendment incorporates the guidance issued on September 30, 2008 in a joint press release by the FASB and the Securities and Exchange Commission.
9/30/2008
SEC Charges Investment Adviser with Fraud for Failing to Disclose Solicitation Fee
Authors: Jay B. Gould, Michael G. Wu, Terry Davis, Clint A. Keller
Recent charges brought by the Securities and Exchange Commission illustrate the continued need for investment advisers to carefully scrutinize all solicitation arrangements in order to ensure that such arrangements are adequately disclosed and are consistent with the adviser’s fiduciary obligations.
SEC Charges Investment Adviser with Fraud for Failing to Disclose Solicitation Fee
Authors: Jay B. Gould, Michael G. Wu, Terry Davis, Clint A. Keller
Recent charges brought by the Securities and Exchange Commission illustrate the continued need for investment advisers to carefully scrutinize all solicitation arrangements in order to ensure that such arrangements are adequately disclosed and are consistent with the adviser’s fiduciary obligations.
9/18/2008
SEC Adopts New Short Sale Rules
Authors: Jay B. Gould, Michael G. Wu, Terry Davis, Clint A. Keller
On September 17, 2008, the Securities and Exchange Commission used its emergency powers to adopt new rules intended to protect investors against “naked” short selling. The rules are effective as of 12:01 am (EST) today. Unlike the order issued in July, these rules will apply to all public companies, not just selected financial institutions.
SEC Adopts New Short Sale Rules
Authors: Jay B. Gould, Michael G. Wu, Terry Davis, Clint A. Keller
On September 17, 2008, the Securities and Exchange Commission used its emergency powers to adopt new rules intended to protect investors against “naked” short selling. The rules are effective as of 12:01 am (EST) today. Unlike the order issued in July, these rules will apply to all public companies, not just selected financial institutions.
7/22/2008
SEC Clarifies Application of Cash Solicitation Rule to Payments by Investment Advisers
Authors: Jay B. Gould, Michael G. Wu, Terry Davis, Clint A. Keller
In a July 15 interpretative letter, the SEC staff clarified that Rule 206(4)-3 (the “Cash Solicitation Rule”) under the Investment Advisers Act of 1940 (the “Advisers Act”) does not apply to a registered investment adviser’s cash payments to a person solely to compensate that person for soliciting investors for, or referring investors to, an investment pool managed by the adviser.
SEC Clarifies Application of Cash Solicitation Rule to Payments by Investment Advisers
Authors: Jay B. Gould, Michael G. Wu, Terry Davis, Clint A. Keller
In a July 15 interpretative letter, the SEC staff clarified that Rule 206(4)-3 (the “Cash Solicitation Rule”) under the Investment Advisers Act of 1940 (the “Advisers Act”) does not apply to a registered investment adviser’s cash payments to a person solely to compensate that person for soliciting investors for, or referring investors to, an investment pool managed by the adviser.
4/17/2008
SEC Identifies Common Targets for Investment Adviser Examinations
Authors: Jay B. Gould, Michael G. Wu, Terry Davis, Clint A. Keller
At the March 20, 2008, Investment Adviser Compliance Best Practices Summit, Lori Richards, Director of the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations, described the types of investment advisers and issues that are the current focus of SEC examinations.
SEC Identifies Common Targets for Investment Adviser Examinations
Authors: Jay B. Gould, Michael G. Wu, Terry Davis, Clint A. Keller
At the March 20, 2008, Investment Adviser Compliance Best Practices Summit, Lori Richards, Director of the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations, described the types of investment advisers and issues that are the current focus of SEC examinations.
1/22/2008
New Valuation Standards May Affect Transparency and Fees
Authors: Jay B. Gould, Michael G. Wu, Clint A. Keller
The Financial Accounting Standards Board (“FASB”) recently reaffirmed that companies, including investment managers, would be required to implement Statement 157, Fair Value Measurements (“FAS 157”), with respect to the valuation of financial assets and liabilities in fiscal years beginning after November 15, 2007. Compliance with FAS 157 may result in lower asset valuations and, therefore, lower fees for investment managers who are compensated based on the value of the assets they manage.
New Valuation Standards May Affect Transparency and Fees
Authors: Jay B. Gould, Michael G. Wu, Clint A. Keller
The Financial Accounting Standards Board (“FASB”) recently reaffirmed that companies, including investment managers, would be required to implement Statement 157, Fair Value Measurements (“FAS 157”), with respect to the valuation of financial assets and liabilities in fiscal years beginning after November 15, 2007. Compliance with FAS 157 may result in lower asset valuations and, therefore, lower fees for investment managers who are compensated based on the value of the assets they manage.
6/1/2007
Securities and Tax Implications for Hedge Fund Managers in Post-FIEL Japan
Source: ComplianceAsia
Authors: Jay B. Gould, Yukinori Machida
Yukinori Machida and Jay Gould, members of Pillsbury Winthrop Shaw Pittman's Investment Funds & Investment Management Practice Team, co-wrote this article which originally appeared in ComplianceAsia, June 1, 2007.
Securities and Tax Implications for Hedge Fund Managers in Post-FIEL Japan
Source: ComplianceAsia
Authors: Jay B. Gould, Yukinori Machida
Yukinori Machida and Jay Gould, members of Pillsbury Winthrop Shaw Pittman's Investment Funds & Investment Management Practice Team, co-wrote this article which originally appeared in ComplianceAsia, June 1, 2007.
5/30/2007
Waves of Change Hit Shores of Offshore “Tax Havens”
Authors: Jay B. Gould, Michael G. Wu
Many fund managers establish investment funds in offshore “tax haven” jurisdictions to satisfy the tax efficiency requirements of their tax-exempt investors (i.e., non-profit entities such as foundations and pension funds). The use of offshore jurisdictions for the purpose of tax avoidance has been a great success for tax-exempt investors, much to the chagrin of the U.S. Congress, which recently estimated that more than $100 billion in tax revenue is lost each year due to investments in offshore funds.
Waves of Change Hit Shores of Offshore “Tax Havens”
Authors: Jay B. Gould, Michael G. Wu
Many fund managers establish investment funds in offshore “tax haven” jurisdictions to satisfy the tax efficiency requirements of their tax-exempt investors (i.e., non-profit entities such as foundations and pension funds). The use of offshore jurisdictions for the purpose of tax avoidance has been a great success for tax-exempt investors, much to the chagrin of the U.S. Congress, which recently estimated that more than $100 billion in tax revenue is lost each year due to investments in offshore funds.
March 2007
The Secret Life of Hedge Funds May Be Over
Source: Institutional Investor Hedge Fund Asset Flows & Trends Report 2006-2007
Author: Jay B. Gould
Jay B. Gould, a partner in Pillsbury Winthrop Shaw Pittman's Corporate & Securities practice group and co-leader of the firm's Investment Funds & Investment Management practice team, authored this article which originally appeared in Institutional Investor's Hedge Fund Asset Flows & Trends Report, 2006-2007.
The Secret Life of Hedge Funds May Be Over
Source: Institutional Investor Hedge Fund Asset Flows & Trends Report 2006-2007
Author: Jay B. Gould
Jay B. Gould, a partner in Pillsbury Winthrop Shaw Pittman's Corporate & Securities practice group and co-leader of the firm's Investment Funds & Investment Management practice team, authored this article which originally appeared in Institutional Investor's Hedge Fund Asset Flows & Trends Report, 2006-2007.
1/5/2007
Round II - The SEC Takes Aim at Hedge Funds and Private Equity Funds with Proposed Fiduciary Rule and Increased Accredited Investor Standard
Authors: Jay B. Gould, Michael G. Wu
On December 27, 2006, the SEC published two new rule proposals, a broad anti-fraud rule, and a substantial increase in the net worth standard for individuals who can invest in certain types of private funds that issue securities in reliance on the Regulation D private placement exemption under the Securities Act of 1933 (the “Securities Act”). The SEC proposed the new anti-fraud rule as a result of the D.C. Court of Appeals decision in Goldstein v. SEC, which vacated the SEC’s hedge fund adviser registration rule. The Goldstein decision left unclear the extent to which an adviser owes a duty to investors in a fund, as opposed to the fund itself. Also, in order to stem the “retailization” of hedge fund, the SEC proposed to limit the availability of private funds relying on Section 3(c)(1) of the Investment Company Act of 1940 to unsophisticated retail investors.
Round II - The SEC Takes Aim at Hedge Funds and Private Equity Funds with Proposed Fiduciary Rule and Increased Accredited Investor Standard
Authors: Jay B. Gould, Michael G. Wu
On December 27, 2006, the SEC published two new rule proposals, a broad anti-fraud rule, and a substantial increase in the net worth standard for individuals who can invest in certain types of private funds that issue securities in reliance on the Regulation D private placement exemption under the Securities Act of 1933 (the “Securities Act”). The SEC proposed the new anti-fraud rule as a result of the D.C. Court of Appeals decision in Goldstein v. SEC, which vacated the SEC’s hedge fund adviser registration rule. The Goldstein decision left unclear the extent to which an adviser owes a duty to investors in a fund, as opposed to the fund itself. Also, in order to stem the “retailization” of hedge fund, the SEC proposed to limit the availability of private funds relying on Section 3(c)(1) of the Investment Company Act of 1940 to unsophisticated retail investors.
10/24/2006
Should Hedge Fund Managers Hedge Their Exposure to Lawsuits?
Authors: Jay B. Gould, Michael G. Wu
A couple of startling trends have emerged over the last few years, which demonstrate a significant increase in the number of lawsuits brought against hedge fund managers and their directors and officers, and an increase in the dollar amount necessary to settle these lawsuits. Just a few years ago, only a few of the largest hedge funds purchased management liability insurance. Now, according to The Chubb Group of Insurance Companies, at least 50% of the top 25 hedge funds carry a management liability policy.
Should Hedge Fund Managers Hedge Their Exposure to Lawsuits?
Authors: Jay B. Gould, Michael G. Wu
A couple of startling trends have emerged over the last few years, which demonstrate a significant increase in the number of lawsuits brought against hedge fund managers and their directors and officers, and an increase in the dollar amount necessary to settle these lawsuits. Just a few years ago, only a few of the largest hedge funds purchased management liability insurance. Now, according to The Chubb Group of Insurance Companies, at least 50% of the top 25 hedge funds carry a management liability policy.
8/14/2006
SEC Staff Provides No-Action Relief as a Result of Court's Goldstein Decision
Authors: Jay B. Gould, Robert B. Robbins
On August 10, 2006, the staff of the Division of Investment Management of the Securities and Exchange Commission issued a "no-action" letter to the American Bar Association's Subcommittee on Private Investment Entities to provide guidance to the hedge fund industry following the decision of the U.S. Court of Appeals for District of Columbia Circuit in June 2006, Goldstein v. SEC. The Goldstein decision had vacated Rule 203(b)(3)-2 and its related amendments (the "Hedge Fund Rule") under the Investment Advisers Act of 1940, the intent and effect of which had been to require the registration of a substantial number of investment advisers to hedge funds. The SEC did not appeal the ruling and, as of August 7, 2006, the Court decision became final.
SEC Staff Provides No-Action Relief as a Result of Court's Goldstein Decision
Authors: Jay B. Gould, Robert B. Robbins
On August 10, 2006, the staff of the Division of Investment Management of the Securities and Exchange Commission issued a "no-action" letter to the American Bar Association's Subcommittee on Private Investment Entities to provide guidance to the hedge fund industry following the decision of the U.S. Court of Appeals for District of Columbia Circuit in June 2006, Goldstein v. SEC. The Goldstein decision had vacated Rule 203(b)(3)-2 and its related amendments (the "Hedge Fund Rule") under the Investment Advisers Act of 1940, the intent and effect of which had been to require the registration of a substantial number of investment advisers to hedge funds. The SEC did not appeal the ruling and, as of August 7, 2006, the Court decision became final.
7/26/2006
Performance and Advertising—A Practical Guide for Hedge Funds in the Post Registration Era
Authors: Jay B. Gould, Michael G. Wu
On June 23, 2006, the U.S. Court of Appeals for the D.C. Circuit vacated the rule, which required hedge fund managers to register with the Securities and Exchange Commission (the “SEC”). As a result, hedge fund managers are no longer required to register with the SEC, nor are they subject to SEC compliance inspections and examinations. However, the court’s ruling does not affect the SEC’s authority to investigate and bring enforcement actions against hedge fund managers, regardless of whether they are registered, for violating the anti-fraud provisions of the Investment Advisers Act of 1940 (the “Advisers Act”).
Performance and Advertising—A Practical Guide for Hedge Funds in the Post Registration Era
Authors: Jay B. Gould, Michael G. Wu
On June 23, 2006, the U.S. Court of Appeals for the D.C. Circuit vacated the rule, which required hedge fund managers to register with the Securities and Exchange Commission (the “SEC”). As a result, hedge fund managers are no longer required to register with the SEC, nor are they subject to SEC compliance inspections and examinations. However, the court’s ruling does not affect the SEC’s authority to investigate and bring enforcement actions against hedge fund managers, regardless of whether they are registered, for violating the anti-fraud provisions of the Investment Advisers Act of 1940 (the “Advisers Act”).
7/20/2006
Hard Times for Soft Dollars
Authors: Jay B. Gould, Michael G. Wu
On July 12, 2006, the Securities and Exchange Commission (the “SEC”) voted to publish an Interpretive Release (the “Release”) that provides guidance on money managers' use of client commissions to pay for brokerage and research services under the "soft dollars" safe harbor in Section 28(e) of the Securities Exchange Act of 1934.
Hard Times for Soft Dollars
Authors: Jay B. Gould, Michael G. Wu
On July 12, 2006, the Securities and Exchange Commission (the “SEC”) voted to publish an Interpretive Release (the “Release”) that provides guidance on money managers' use of client commissions to pay for brokerage and research services under the "soft dollars" safe harbor in Section 28(e) of the Securities Exchange Act of 1934.
6/20/2006
To Be Or Not To Be: Asian Hedge Funds Face U.S. Registration and Distribution Conundrum
Authors: William R. Huss, Jay B. Gould
While U.S.-focused hedge funds struggled for much of 2005, hedge funds focused on certain Asian strategies posted record performance numbers last year. Specifically, the rising tide in Japan, evidenced by the approximately 20% increase in the benchmark Nikkei 225 Index, produced returns in the 30% to 40% range by certain Japanese equity long-short hedge fund managers. With such a performance disparity to the U.S. markets, it was inevitable that U.S. institutional investors would flock to the region – and they have. It is estimated that as much as $20-$25 billion on an annualized basis is now flowing into local Japanese hedge funds; much of it from U.S. fund of funds, pension funds, and other institutional investors. Japanese and other Asian-based hedge fund managers understand that there is a renewed interest in Asia and have become more aggressive in their marketing efforts towards U.S.-based investors.
To Be Or Not To Be: Asian Hedge Funds Face U.S. Registration and Distribution Conundrum
Authors: William R. Huss, Jay B. Gould
While U.S.-focused hedge funds struggled for much of 2005, hedge funds focused on certain Asian strategies posted record performance numbers last year. Specifically, the rising tide in Japan, evidenced by the approximately 20% increase in the benchmark Nikkei 225 Index, produced returns in the 30% to 40% range by certain Japanese equity long-short hedge fund managers. With such a performance disparity to the U.S. markets, it was inevitable that U.S. institutional investors would flock to the region – and they have. It is estimated that as much as $20-$25 billion on an annualized basis is now flowing into local Japanese hedge funds; much of it from U.S. fund of funds, pension funds, and other institutional investors. Japanese and other Asian-based hedge fund managers understand that there is a renewed interest in Asia and have become more aggressive in their marketing efforts towards U.S.-based investors.
6/12/2006
Concept Clash—Differing Duties Under Investment Advisers Act and Delaware Partnership Law
Authors: Robert B. Robbins, Jay B. Gould
Many of the hedge fund managers that have registered as investment advisers as a result of the new hedge fund adviser registration rule that became effective as of February 2006, are experiencing their first examination by the Securities and Exchange Commission (“SEC”), or soon will. The SEC’s Office of Compliance, Inspections, and Examinations has wasted little time gearing up to examine newly registered hedge fund managers and have made various public statements regarding the focus of these examinations. On the top of every SEC examination list for hedge fund managers is the onerous and opaque “conflicts of interest” review. But what does it mean for a hedge fund manager to have a conflict of interest with an advisory client, and how is the SEC likely to view practices that most hedge fund managers have taken for granted since they began managing their hedge funds?
Concept Clash—Differing Duties Under Investment Advisers Act and Delaware Partnership Law
Authors: Robert B. Robbins, Jay B. Gould
Many of the hedge fund managers that have registered as investment advisers as a result of the new hedge fund adviser registration rule that became effective as of February 2006, are experiencing their first examination by the Securities and Exchange Commission (“SEC”), or soon will. The SEC’s Office of Compliance, Inspections, and Examinations has wasted little time gearing up to examine newly registered hedge fund managers and have made various public statements regarding the focus of these examinations. On the top of every SEC examination list for hedge fund managers is the onerous and opaque “conflicts of interest” review. But what does it mean for a hedge fund manager to have a conflict of interest with an advisory client, and how is the SEC likely to view practices that most hedge fund managers have taken for granted since they began managing their hedge funds?
8/1/2005
NASD Expands Fairness Opinion Disclosure
Source: International Financial Law Review
Author: Jay B. Gould
This article appeared in slightly different form in the August 1, 2005 issue of International Financial Law Review. Mr. Gould assesses the impact of the NASD's new rule on fairness opinions and warn that the issue might still need to be resolved in the courts.
NASD Expands Fairness Opinion Disclosure
Source: International Financial Law Review
Author: Jay B. Gould
This article appeared in slightly different form in the August 1, 2005 issue of International Financial Law Review. Mr. Gould assesses the impact of the NASD's new rule on fairness opinions and warn that the issue might still need to be resolved in the courts.
11/22/2004
Capital Introduction for Hedge Funds, What Lies Beneath
Source: Hedgeco.Net
Author: Jay B. Gould
This article appeared in slightly different form on Hedgeco.Net.
Capital Introduction for Hedge Funds, What Lies Beneath
Source: Hedgeco.Net
Author: Jay B. Gould
This article appeared in slightly different form on Hedgeco.Net.
