Asset Management

On Monday the SEC announced its enforcement results for FY 2020, accompanied by a report from the Director of its Division of Enforcement. This report confirms what we have seen over the past year for private fund managers: although OCIE has been more active on adviser examinations, we’ve seen a bit less enforcement activity. Yet in spite of the headwinds posed by the global pandemic, the Commission brought 715 enforcement actions in FY 2020, representing only a 17% decrease from FY 2019. It also obtained record-breaking monetary remedies with total penalties and disgorgement reaching $4.68 billion, an 8% increase…
As of September 2019, 61,691 public charities and 11,529 private and public foundations were registered in New York, and one could expect that such numbers have increased in the wake of the COVID-19 pandemic and widespread protests against systemic racism. Most charities are community-based and focus on local needs. The pandemic has put immense strain on the resources of many charitable nonprofits at a time when their services are most desperately needed. Faced with the prospect of shutting or drastically reducing operations, nonprofits — particularly those that provide overlapping or complimentary services — may consider combining as a means to…
For private investment funds with limited or no remaining uncalled commitments, net asset value (NAV) and hybrid credit facilities can provide a useful source of liquidity to support underperforming assets or allow funds to engage in opportunistic acquisitions. These types of facilities are receiving renewed attention for funds seeking liquidity in light of the uncertainty created by the COVID-19 global pandemic. However, in the case of NAV or hybrid credit facilities that were put in place prior to the onset of the pandemic, more recent valuation reporting has created challenges for some funds in complying with the financial covenants under…
Originally posted March 31, 2020. Last updated September 30, 2020. In response to the novel coronavirus (COVID-19) pandemic, the Securities and Exchange Commission and its Staff have provided temporary regulatory relief and guidance to assist a variety of market participants. This document summarizes the SEC’s actions that affect public companies, registered investment companies and registered investment advisors. The SEC Staff is monitoring developments closely and will consider additional relief and guidance from other regulatory requirements for those affected by the coronavirus as conditions warrant. We will update this summary as the SEC takes additional actions. The guide linked below should…
Proskauer partner Josh Newville discussed the SEC’s focus on valuation of private fund investments at the recent Securities Enforcement Forum West 2020. The global COVID-19 crisis has added a layer of complexity to the valuation process, requiring special care. As we predicted in our 2020 Top Ten Regulatory and Litigation Risks for Private Funds, ongoing economic uncertainty will likely lead to increased scrutiny on fund managers’ valuation of privately-held portfolio companies from both the SEC and investors. At the recent securities enforcement conference, Josh addressed the following potential risks. In light of recent events surrounding tech unicorn…
We have seen the SEC increase its focus on valuation of privately-held portfolio companies recently. The SEC’s increased focus is in line with our predication made in the Top Ten Regulatory and Litigation Risks for Private Funds in 2020 post from the start of this year, and we expect the trend to continue. The global COVID-19 crisis has added a layer of complexity to the valuation process, which for illiquid assets can be challenging during even calm economic conditions. While some companies have benefited from the changes brought on by COVID-19, the overall market conditions resulting from the crisis have…
Shareholder rights plans, commonly known as “poison pills,” are arrangements that can be used by companies to stave off hostile takeovers or activist investors seeking to exert control over a company without paying a control premium. A typical rights plan, if triggered, would allow all shareholders except the triggering person to purchase additional shares in the company at a substantial discount. The resulting share dilution makes it significantly more expensive for the triggering person to purchase a controlling stake in the company. Because of this, it is extremely rare for a rights plan to be triggered; instead, rights plans can…
Many portfolio companies continue to confront business disruptions as a result of the COVID-19 pandemic. Even prior to the pandemic, we were seeing an uptick in litigation claims against sponsors and funds arising out of portfolio companies. The liquidity challenges since March have increased those risks at some companies. For sponsors, many of these risks arise from director positions and conflicts of interest, whether real or alleged. Below we provide tangible ways for fund sponsors to identify risks, educate their directors, and mitigate risk.…
The COVID-19 crisis has highlighted, in a dramatic way, the issues that a country may face if it loses control over certain strategic sectors of its economy to foreign interests. Like other countries in the world, France has had in place for many years a mechanism to screen foreign direct investments (”FDI”) in strategic sectors, but over the last year it has adopted legislation to markedly reinforce that mechanism, consistent with a global trend developing even before the COVID-19 pandemic. Foreign investors contemplating an investment in France should expect an environment of stricter scrutiny of proposed transactions from the perspective…
With more people working remotely than ever before in light of COVID-19, firms in the private equity and hedge fund space should review their Regulation S-P privacy and information-safeguarding policies to ensure they are compliant and ready for a prolonged period of remote work. In particular, in view of SEC guidance, firms should focus on several key areas including personal devices and personally identifiable information.…
The COVID-19 pandemic has created significant challenges, as well as significant opportunities for both hedge fund managers and investors. Hedge fund managers are launching new funds and attracting new investor capital, seeking to capitalize on investment opportunities arising in a dislocated market. How has the world changed, and what advice can be given to new or existing managers trying to launch a new hedge fund or raise new capital in this environment? Read on for practical considerations on launching a new fund. Download the full article here.
The ongoing COVID-19 crisis is presenting fund managers with numerous challenges. One key challenge is to make sure that their portfolio companies have sufficient capital available to weather this particular storm. But how can fund managers ensure the liquidity required by their funds and portfolio companies is available? Proskauer’s leading Private Investment Funds team examines the ‘recycling’ options available in the market and outlines the main considerations fund managers should keep in mind when considering liquidity options. Fund recycling explained When fund managers find their portfolios in need of additional funding they can seek financing from multiple sources of alternative…
A new and unprecedented investment environment has been created during the current COVID emergency as every state that has price gouging laws on its books has activated them, and states without official statues are regulating prices by executive order or existing consumer protection and unfair trade practice laws. Never before have price controls been active across the entire United States, and for such a lengthy period of time, requiring fund managers to consider the risks of price gouging enforcement and assess portfolio investments in light of key attributes of price gouging statues. In this article, we review these potential risks…
Further to our last update on prospective changes to the UK insolvency regime in light of COVID-19, the UK government revealed the Corporate Insolvency and Governance Bill on 20 May. The Bill follows the lead of several other jurisdictions including the Netherlands, Hong Kong, Spain, Australia and Germany in introducing such emergency measures and includes perhaps some of the most significant reforms to the UK insolvency regime since The Enterprise Act 2002. The Bill introduces a number of both temporary and permanent changes as follows: Temporary changes  Wrongful Trading: wrongful trading sanctions are temporarily suspended from 1 March to 30…
The unprecedented level of uncertainty caused by COVID-19 is expected to trigger portfolio company and fund level liquidity issues as fund sponsors grapple with  unexpected need for additional capital in segments of their portfolios, whether due to stalled public markets, lack of available credit,  or otherwise.  In addition, we expect segments within the limited partner (“LP”) community will seek sources for liquidity due to decreased realization events and declining public markets, while we expect others (particularly secondary funds, preferred equity providers and other asset managers) will view the current disruption as an attractive opportunity to put available capital to work.…
Private fund managers are facing market disruption as a result of COVID-19 – volatile valuations, liquidity concerns and fundraising challenges are just some of the myriad issues. Eventually, as the current environment calms, private fund managers will navigate next steps. Built to serve asset managers, Proskauer’s Private Funds Group offers a series of cross-border insights to help chart the course forward. Explore Proskauer’s insights on tomorrow’s complex business challenges: Guide to “Recycling” Options for Fund Managers Preferred Equity: Flexible Financing Solutions A Guide to GP-Led Solutions COVID-19: Are Clawbacks Around the Corner? Considerations for Private Fund Managers to Weather the