Last year, we wrote, “The regulatory and litigation risks for private funds are greater than at any time since the financial crisis in 2008.” That statement is even more true today. The Wall Street Journal recently published separate front-page stories on an SEC initiative to oversee large private companies and the explosive growth of the private credit industry (suggesting a more active phase of regulatory oversight). Growth itself is not necessarily a risk, but disputes – and regulators – tend to follow capital.

Private funds are now an integral part of the global economy and, as a consequence, are affected by it. Currently, there are massive structural changes occurring simultaneously across industries and the economy as a whole. For example: cryptocurrencies could threaten legacy payment systems and currencies; the electrification of the auto industry may lead to obsolescence of the internal combustion engine; and climate change will increase the ESG groundswell. These changes are not merely disruptive; they are transformative.

Meanwhile, the macro economy is undergoing a sea change. Inflation is higher than at any time since 1982. Inflation will lead to higher interest rates – sparking changes in investment assumptions and behaviors conditioned over decades to a low inflation environment.  In response, the federal government is ending early its policy of quantitative easing which it continued as part of the response to the pandemic.  These changes are happening as we enter the third year of the pandemic which has disrupted every part of society, not just supply chains.

Direct government action may spur even greater changes. Antitrust, privacy, and cybersecurity enforcement – and the threat of enforcement – is palpable and likely to cut across sectors in the coming months, especially tech. China has undertaken its own crackdown on tech that reflects policy choices at the highest level of government – which may persist for decades. Finally, geopolitical tensions are likely to rise, especially if Russia invades Ukraine, which may cause markets to shudder.

These are merely some of the known risks.

None of this is to say that we are concerned for the private funds industry. It will continue to flourish. Consumer confidence and spending remain robust, capital (for now) remains historically cheap, and private equity investment is strong. But the benign market and relatively benign regulatory environment of the last decade is unlikely to persist. Accelerated change and volatility are coming, and together they are likely to result in more disputes and regulatory inquiries.

With that backdrop, we have developed this list of Top 10 Regulatory and Litigation Risks for Private Funds in 2022 to assist sponsors and managers to assess their own risks and take steps to mitigate their risk profile. We will be publishing a series of posts on each of these topics in the weeks ahead.

    1. Decentralized Finance: The Next Frontier of SEC Enforcement
    2. Treating “Like for Like”: SPAC Disclosure, Marketing and Gatekeeping in 2022
    3. ESG: Practical Points For Where Market Practice and Legal Trends Collide
    4. Regulatory Shake-Out on Digital Assets: An Industry Waits for Additional Guidance
    5. Economic Sanctions and Asset Seizures: An Important Focus for the Biden Administration
    6. Increased Regulatory Focus on Privacy and Cybersecurity for Private Funds in 2022
    7. Insider Trading, MNPI and Related Internal Controls: A Renewed Focus by the SEC
    8. The Trend of Increasing Disclosure Obligations for Private Funds Continues in 2022
    9. Conflicts of Interest: How High Will the Bar Be Raised
    10. Portfolio Company Risk: Plaintiffs Set Sights on Sponsors and Boards of Directors

 

Photo of Steven Baker Steven Baker

Steven Baker is a partner in the Litigation department and a member of the International Arbitration group. He has over 25 years of experience advising clients on complex, often multi-jurisdictional disputes in a wide range of industries, including asset management, technology, life sciences…

Steven Baker is a partner in the Litigation department and a member of the International Arbitration group. He has over 25 years of experience advising clients on complex, often multi-jurisdictional disputes in a wide range of industries, including asset management, technology, life sciences, financial services and defence sectors. He also has extensive experience advising upon and managing disputes for clients involving major technology or telecommunications projects and their financing, technology licensing and misappropriation of trade secrets.

Steven is ranked as a leading litigator for banking and financial services litigation in both Legal 500 and Chambers & Partners, who comment that “Steven is a tremendous litigator – he is very clever and efficient and handles multiple clients well” as well as being ”very thoughtful, very into the detail, but equally takes a very commercial stance”, “Very good at running complex commercial disputes, very bright and a pleasure to deal with” and “has a really good grasp of complex banking litigation.” He was named by Benchmark Litigation as its inaugural “UK Lawyer of the Year” in 2019 as well as a National Litigation Star (2019-2021). He was also designated a  Client Services All-Star by the BTI Consulting Group, which selects lawyers who “deliver outstanding legal skills and superior client services” based on interviews with legal corporate counsel at the world’s leading organizations.

Steven lectures on dispute resolution-related matters, including on the M. Sc. Major Projects course at Said Business School, University of Oxford. He is also the co-author of a leading publication on technology disputes entitled, “IT Contracts and Dispute Management: A Practitioner’s Guide to the Project Lifecycle”, a second edition having been commissioned.

Photo of Margaret A. Dale Margaret A. Dale

Margaret Dale is a versatile first-chair litigator who handles different types of complex business disputes for a wide variety of clients across many industries.

While her practice is diverse, she regularly handles privacy and data security matters, including regulatory investigations and class action…

Margaret Dale is a versatile first-chair litigator who handles different types of complex business disputes for a wide variety of clients across many industries.

While her practice is diverse, she regularly handles privacy and data security matters, including regulatory investigations and class action lawsuits stemming from data breaches. She also focuses on intellectual property, where she represents individual artists and arts-related organizations and museums. With respect to securities and corporate governance, Margaret handles SEC enforcement proceedings, shareholder and partnership disputes, stock option, warrant and preferred stock matters, escrow fights and Delaware 220 actions, as well as regulatory and internal investigations.

Photo of Michael R. Hackett Michael R. Hackett

Michael R. Hackett is a partner in the Litigation Department and a member of the Asset Management Litigation practice. Mike is an experienced litigator and trial lawyer focused on sophisticated business disputes.

A significant portion of Mike’s practice concerns disputes and regulation involving…

Michael R. Hackett is a partner in the Litigation Department and a member of the Asset Management Litigation practice. Mike is an experienced litigator and trial lawyer focused on sophisticated business disputes.

A significant portion of Mike’s practice concerns disputes and regulation involving private funds, including private equity, venture capital, hedge, real estate and private credit funds, as well as other limited partnerships, where he regularly advises funds, fund sponsors, investment advisers and institutional and individual investors.

Mike’s experience representing private fund clients runs the gamut, from control contests within advisers, to disputes between limited partners and general partners, to representation of investment advisers in connection with regulatory examinations, investigations and enforcement matters. Mike also routinely represents fund sponsors and their portfolio companies, including in significant post-closing disputes.

In addition to his private funds practice, Mike represents public and private companies in a variety of complex commercial and securities litigation matters, including in the areas of corporate governance, fiduciary obligations, capital markets, financial services, and bankruptcy and insolvency.

Mike has been named a “Rising Star” by Massachusetts Super Lawyers, and was identified as an “associate to watch” by Chambers USA in 2017 and 2018.

During law school, Mike served as an intern judicial clerk to the Honorable William G. Young of the United States District Court for the District of Massachusetts.

Photo of William Komaroff William Komaroff

Bill Komaroff is a partner in the Litigation Department and White Collar Practice Group. He has a nationwide federal practice focused on corporate defense and investigations, counseling and defending institutional and individual clients in connection with a broad array of complex government investigations…

Bill Komaroff is a partner in the Litigation Department and White Collar Practice Group. He has a nationwide federal practice focused on corporate defense and investigations, counseling and defending institutional and individual clients in connection with a broad array of complex government investigations, prosecutions and civil disputes.

Bill also has served as a member of the Criminal Justice Act Panel for the District Court for the Southern District of New York.

From 2003 to 2007, Bill served as an Assistant U.S. Attorney for the Southern District of New York and prosecuted tax fraud, money laundering, bank fraud, mail fraud and wire fraud cases, among others. He tried numerous cases to successful jury verdicts and argued cases before the Second Circuit Court of Appeals.

Photo of Kirsten E. Lapham Kirsten E. Lapham

Kirsten Lapham is a partner specialising in financial services regulation. She advises a broad range of institutional clients on a variety of financial services regulatory and compliance issues. Her practice has a specific emphasis on the regulatory issues impacting asset managers arising under…

Kirsten Lapham is a partner specialising in financial services regulation. She advises a broad range of institutional clients on a variety of financial services regulatory and compliance issues. Her practice has a specific emphasis on the regulatory issues impacting asset managers arising under the AIFMD, and MiFID for a range of EU and indirectly impacted firms outside of the EU.

Kirsten has experience advising multiple clients on the EU marketing and registration regimes and overlaying local regulatory considerations, such as the U.K. retail distribution review and Financial Promotion regime. She has also worked on MIFID II, SFDR and the Senior Managers and Certification Regime (SMCR) implementation projects for firms subject to regulatory developments. Kirsten routinely advises on the regulatory issues that impact M&A transactions. She has represented some of the largest and most well-known alternative investment managers, including: TPG; PIMCO; Citi Private Bank; AnaCap Financial Partners, UBS, Pathway Capital LLC; and a number of US and UK boutiques among many others.

Kirsten is co-chair of Proskauer’s global ‘ESG Taskforce’ and as an expert in the sustainable financing space, regularly speaks at industry events and is quoted on these issues. In addition, She has assisted numerous firms on ESG driven projects including the drafting of ESG policies, and internal restructurings, capturing diversity and inclusion, modern slavery and broader internal issues related to responsible investing. Kirsten works closely with clients on best approach for disclosure to both investors and regulators, on the integration of ESG practices in investment processes.

Photo of Timothy W. Mungovan Timothy W. Mungovan

Tim Mungovan serves as chair of the Firm’s Litigation Department, co-head of Proskauer’s Commercial Litigation Practice Group and co-head of the Asset Management Litigation team. His practice is focused on solving complex business disputes in a variety of areas including securities, investment management…

Tim Mungovan serves as chair of the Firm’s Litigation Department, co-head of Proskauer’s Commercial Litigation Practice Group and co-head of the Asset Management Litigation team. His practice is focused on solving complex business disputes in a variety of areas including securities, investment management, corporate governance, fiduciary obligations, capital markets, financial services, bankruptcy and insolvency. A significant portion of Tim’s practice involves disputes and risk management for private investment funds (private equity, venture capital and hedge funds) and private credit vehicles.

Recently, Tim has been heavily involved in: representing the Financial Oversight and Management Board for Puerto Rico in litigation involving the restructuring of Puerto Rico’s finances; SEC investigations of advisers to private equity funds and venture funds; control contests within advisers to private equity and venture capital funds; debt restructuring disputes on behalf of private credit funds and business development companies (BDCs); and litigation on behalf of two publicly-listed biotech companies against a hedge fund manager and a venture fund manager, respectively.

Photo of Dorothy Murray Dorothy Murray

Dorothy Murray is a partner in the Litigation Department specializing in investment and commercial dispute resolution. She supports clients across a wide range of sectors, including financial services, asset management/private equity, energy, telecoms, and maritime.

Dorothy represents clients in disputes arising from all…

Dorothy Murray is a partner in the Litigation Department specializing in investment and commercial dispute resolution. She supports clients across a wide range of sectors, including financial services, asset management/private equity, energy, telecoms, and maritime.

Dorothy represents clients in disputes arising from all aspects of their business, whether those disputes are post M&A, shareholder, employment, contractual, partnership or JV related.

Dorothy has experience managing litigation in common and civil law jurisdictions, and in commercial and investor state arbitration.  She is fluent with all the key divisions of the English High Courts and major arbitral institutional rules, including LCIA, ICC, LMAA, SCC, ISCID and UNICTRAL.  One of her particular interests is in the enforcement of arbitral awards.

In addition to representation in contentious matters, she uses her disputes experience to support clients at the transaction and pre‑action stages, working with companies and funds to identify, understand and mitigate personal and corporate liabilities and risks.

Photo of Joshua M. Newville Joshua M. Newville

Joshua M. Newville is a partner in the Litigation Department in New York and a member of Proskauer’s White Collar Defense & Investigations Group and the Asset Management Litigation team.

Josh handles securities litigation, enforcement and regulatory matters, representing corporations and senior executives…

Joshua M. Newville is a partner in the Litigation Department in New York and a member of Proskauer’s White Collar Defense & Investigations Group and the Asset Management Litigation team.

Josh handles securities litigation, enforcement and regulatory matters, representing corporations and senior executives in civil and criminal investigations. In addition, Josh advises registered investment advisers and private fund managers on regulatory compliance, SEC exams and related risks.

Photo of Todd J. Ohlms Todd J. Ohlms

Todd J. Ohlms is as a partner in the Litigation department and a member of the Asset Management Litigation Group. Todd has represented clients in business-critical litigation matters for over 25 years, and has tried several cases to verdict before juries and the…

Todd J. Ohlms is as a partner in the Litigation department and a member of the Asset Management Litigation Group. Todd has represented clients in business-critical litigation matters for over 25 years, and has tried several cases to verdict before juries and the bench. He has also participated in numerous arbitration proceedings, including counseling clients regarding disputes subject to international arbitration agreements.

Todd is often retained by private equity firms to counsel them and their portfolio companies on a wide range of matters and is frequently chosen to serve as outside general counsel to their portfolio companies. He also represents family offices in disputes related to their operating companies where sensitive and complex relationships often play as large a role in determining the result as the actual legal theories at issue.

Photo of Seetha Ramachandran Seetha Ramachandran

Seetha Ramachandran is a partner in the Litigation Department.

She is a leading expert in anti-money laundering (AML), Bank Secrecy Act, economic sanctions and asset forfeiture matters. She represents banks, broker dealers, hedge funds, private equity funds, online payment companies, and individual executives…

Seetha Ramachandran is a partner in the Litigation Department.

She is a leading expert in anti-money laundering (AML), Bank Secrecy Act, economic sanctions and asset forfeiture matters. She represents banks, broker dealers, hedge funds, private equity funds, online payment companies, and individual executives and officers, in high stakes and sensitive matters. Her practice focuses on white collar and regulatory enforcement defense, internal investigations, and compliance counseling. In addition to her subject matter expertise, Seetha is an experienced trial and appellate lawyer, having conducted 10 criminal jury trials, argued 10 appeals before the U.S. Court of Appeals for the Second Circuit, and handled ancillary civil proceedings in forfeiture cases.

Photo of Jonathan M. Weiss Jonathan M. Weiss

Jonathan Weiss is a partner in the Litigation Department. Jonathan represents both plaintiffs and defendants in a wide range of high-stakes litigation, including antitrust, class action, financial services, securities and other complex commercial litigation. Jonathan has won multiple noteworthy jury verdicts, including the…

Jonathan Weiss is a partner in the Litigation Department. Jonathan represents both plaintiffs and defendants in a wide range of high-stakes litigation, including antitrust, class action, financial services, securities and other complex commercial litigation. Jonathan has won multiple noteworthy jury verdicts, including the fourth largest jury award in the history of the State of Arizona (over $110 million), and has significant appellate experience briefing and arguing appeals in both state and federal courts across the nation.

Jonathan has been recognized as a “Rising Star” by Southern California Super Lawyers every year since 2011, and was recognized by Legal 500 U.S. in their 2015 leading lawyers in appellate litigation edition, noting his “incredibly dedicated” advocacy on behalf of his clients. Jonathan has also spent considerable time on pro bono matters, for which he has been honored by Public Counsel among other organizations.

In addition to his busy practice, Jonathan has taught courses on Ninth Circuit appellate advocacy throughout Southern California and has lectured at several universities nationally, including Harvard Law School, UCLA Law School, the University of Illinois and the University of Pittsburgh. Jonathan is also a member of the Pacific Council on International Policy.

Photo of Julia Alonzo Julia Alonzo

Julia Alonzo is a senior counsel in the Litigation Department with a focus on securities and corporate governance litigation. She is experienced in complex securities and white collar litigation matters, including federal securities class actions, derivative lawsuits, internal investigations and federal white collar…

Julia Alonzo is a senior counsel in the Litigation Department with a focus on securities and corporate governance litigation. She is experienced in complex securities and white collar litigation matters, including federal securities class actions, derivative lawsuits, internal investigations and federal white collar defense.

Julia maintains an active pro bono practice, with a focus on immigration law, asylum and child welfare issues. In addition, she sits on the associate board of the Brooklyn Defender Services Family Defense Practice, which aims to provide interdisciplinary representation to low-income parents in Brooklyn Family Court.

Photo of James Anderson James Anderson

James Anderson is an attorney in the Litigation Department and a member of the firm’s Asset Management Litigation and Intellectual Property groups. Jim leverages his technological background and expertise to represent clients in sophisticated business and intellectual property disputes.

Jim has experience litigating…

James Anderson is an attorney in the Litigation Department and a member of the firm’s Asset Management Litigation and Intellectual Property groups. Jim leverages his technological background and expertise to represent clients in sophisticated business and intellectual property disputes.

Jim has experience litigating cases for clients in the technology, life sciences, and financial services industries, including a significant number of pharmaceutical, biotech, consumer electronics, and asset management clients. He has litigated cases in state and federal courts throughout the United States, as well as before the International Trade Commission and Patent Trial and Appeal Board.

In addition to his commercial litigation practice, Jim advises clients on intellectual property strategy spanning the full range of patent, trademark, and trade secret protections. He has developed and maintained intellectual property portfolios in a broad range of industries, including consumer products, medical devices, machining and fabrication equipment, and semiconductor devices. Jim is registered to practice before the United States Patent and Trademark Office.

Jim also maintains an active pro bono practice. He has been awarded for his work on behalf of victims of domestic violence and abuse.

Jim has a degree in Mechanical Engineering, with a concentration in energy, power, and fuel cell technologies, from the University of Connecticut. Prior to joining Proskauer, Jim served as a judicial intern in the U.S. District Court for the District of Connecticut and represented clients with the UConn Intellectual Property and Entrepreneurship Law Clinic.

Photo of Julia M. Ansanelli Julia M. Ansanelli

Julia Ansanelli earned her bachelor’s degree from New York University and her J.D. from Touro Law Center, where she graduated as valedictorian of her division. During law school, she served as case note editor of the Touro Law Review and vice president of…

Julia Ansanelli earned her bachelor’s degree from New York University and her J.D. from Touro Law Center, where she graduated as valedictorian of her division. During law school, she served as case note editor of the Touro Law Review and vice president of Touro’s Latin American Law School Association. Julia also interned for the Honorable Magistrate Kathleen Tomlinson in the Eastern District of New York.

Photo of William D. Dalsen William D. Dalsen

Will Dalsen is an associate in the Litigation Department, practicing in the Patent Law, Intellectual Property, and Asset Management Litigation Groups.

Will practices in the area of complex intellectual property disputes, with a primary focus on patent infringement matters. He has litigated several…

Will Dalsen is an associate in the Litigation Department, practicing in the Patent Law, Intellectual Property, and Asset Management Litigation Groups.

Will practices in the area of complex intellectual property disputes, with a primary focus on patent infringement matters. He has litigated several high-profile patent infringement cases for some of the world’s leading technology companies, including Panasonic, Philips, Sony, Mitsubishi and Zenith Electronics.

His practice also includes complex commercial and securities litigation matters, in particular those involving private equity, venture capital and hedge funds. He has represented public and private corporations in contractual disputes, business tort cases, and government investigations. In addition, he advises funds, fund sponsors, investment advisers, and institutional and individual investors.

Photo of Adam L. Deming Adam L. Deming

Adam Deming is an associate in the Litigation Department and a member of the firm’s Appellate and Product Liability groups, and Asset Management Litigation team. He focuses on complex commercial litigation in federal and state courts, covering a broad spectrum of business disputes…

Adam Deming is an associate in the Litigation Department and a member of the firm’s Appellate and Product Liability groups, and Asset Management Litigation team. He focuses on complex commercial litigation in federal and state courts, covering a broad spectrum of business disputes touching on corporate governance, fiduciary obligations, financial services, securities and insolvency. Adam has also represented clients in appeals spanning various areas, including consumer products, life sciences, bankruptcy, labor relations, patent and constitutional law.

Prior to joining Proskauer, Adam served as a law clerk to the Honorable Patty Shwartz on the United States Court of Appeals for the Third Circuit. Adam was also an associate in the New York office of an international law firm. Adam graduated cum laude from the University of Pennsylvania Law School, where he was the managing editor of the Journal of Constitutional Law and an Arthur C. Littleton Fellow instructor in legal writing.  Before law school, Adam was a Teach for America Corps Member in New Orleans, Louisiana, where he taught middle school English for three years.

Photo of Reut N. Samuels Reut N. Samuels

Reut Samuels is an associate in the Litigation Department.

Photo of Hena M. Vora Hena M. Vora

Hena M. Vora is an associate in the Litigation Department and a member of the Asset Management Litigation practice and Products Liability group. Her practice encompasses a range of complex civil and commercial litigation matters, including securities litigation, partnership disputes, and consumer products.…

Hena M. Vora is an associate in the Litigation Department and a member of the Asset Management Litigation practice and Products Liability group. Her practice encompasses a range of complex civil and commercial litigation matters, including securities litigation, partnership disputes, and consumer products.

Hena has experience with various stages of litigation, including pitching clients, coordinating discovery, drafting dispositive motions and trial memoranda, and preparing witnesses for depositions and trial. She also has experience conducting highly sensitive and confidential internal investigations.

Hena maintains an active pro bono practice and has been awarded for creating a partnership between Proskauer’s Boston office and Minds Matter Boston, through which she helps high school students from low-income backgrounds achieve college readiness and success.

Hena earned her J.D. from Emory University School of Law, where she received the Pro Bono Publico honor and a Transactional Law Certificate. In addition, she was a national competitor on the Moot Court Society and served as president of Emory’s South Asian Law Students Association. While at Emory, Hena served as judicial intern for Judge Denny Chin at the U.S. Court of Appeals for the Second Circuit.