Investment Fund Law Blog https://www.investmentfundlawblog.com/ Published by Pillsbury Winthrop Shaw Pittman LLP 2023年10月11日 16:53:47 +0000 en-US hourly 1 118659169 SEC Adopts 13D/13G Amendments https://www.investmentfundlawblog.com/sec-adopts-13d-13g-amendments/ 2023年10月11日 16:53:47 +0000 https://www.investmentfundlawblog.com/?p=1897 The SEC adopted today amendments that will, among other things: shorten the deadline for initial Schedule 13D filings from 10 days to five business days; require that Schedule 13D amendments be filed within two business days (rather than "promptly," which had been interpreted by many practitioners as within one business day in most cases involving […]

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The SEC adopted today amendments that will, among other things:

  • shorten the deadline for initial Schedule 13D filings from 10 days to five business days;
  • require that Schedule 13D amendments be filed within two business days (rather than "promptly," which had been interpreted by many practitioners as within one business day in most cases involving ownership changes under Rule 13d-2(a) that trigger the amendment requirement);
  • shorten the initial Schedule 13G filing deadline for qualified institutional investors and exempt investors from 45 days after the end of a calendar year to 45 days after the end of the calendar quarter in which the investor beneficially owns more than 5% of the covered class;
  • shorten the initial Schedule 13G filing deadline for passive investors from 10 days to 5 business days;
  • revise the Schedule 13G amendment deadline for all 13G filers from 45 days after the end of a calendar year in which any change occurs (other than those exempted under Rule 13d-2(b)) to 45 days after the end of the calendar quarter in which a material change occurs;
  • revise from "promptly" to two business days the Schedule 13G amendment obligations under Rule 13d-2(d) for qualified institutional investors and passive investors when their beneficial ownership exceeds 10% or increases or decreases by 5%;
  • extends the EDGAR filing cut-off time for Schedules 13D and 13G from 5:30 pm to 10:00 pm Eastern time;
  • clarify the Schedule 13D disclosure requirements with respect to derivative securities; and
  • require that Schedule 13D and 13G filings be made using a structured, machine-readable data language.

Pages 10-11 of the adopting release contains a table summarizing the changes. The adopting release also provides guidance regarding the current legal standard governing when two or more persons may be considered a group for the purposes of determining whether the beneficial ownership threshold has been met, as well as how, under the current beneficial ownership reporting rules, an investor’s use of certain cash-settled derivative securities may result in the person being treated as a beneficial owner of the class of the reference equity securities.

The amendments will become effective 90 days after publication in the Federal Register. Compliance with the revised Schedule 13G filing deadlines will be required beginning on Sept. 30, 2024. Compliance with the structured data requirement for Schedules 13D and 13G will be required on Dec. 18, 2024. Compliance with the other rule amendments will be required upon their effectiveness.

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SEC Proposes ESG Rule https://www.investmentfundlawblog.com/sec-proposes-esg-rule/ 2022年7月13日 22:52:04 +0000 https://www.investmentfundlawblog.com/?p=1869 The Securities and Exchange Commission has proposed to amend rules and forms under both the Investment Advisers Act of 1940 and the Investment Company Act of 1940 to require registered investment advisers, certain advisers that are exempt from registration, registered investment companies, and business development companies, to provide additional information regarding their environmental, social, and […]

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The Securities and Exchange Commission has proposed to amend rules and forms under both the Investment Advisers Act of 1940 and the Investment Company Act of 1940 to require registered investment advisers, certain advisers that are exempt from registration, registered investment companies, and business development companies, to provide additional information regarding their environmental, social, and governance ("ESG") investment practices.

The proposed rule is available HERE.

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SEC Adopts Rules to Require Electronic Filing for Investment Advisers and Institutional Investment Managers https://www.investmentfundlawblog.com/sec-adopts-rules-to-require-electronic-filing-for-investment-advisers-and-institutional-investment-managers/ 2022年6月23日 22:25:06 +0000 https://www.investmentfundlawblog.com/?p=1865 In today’s press release, the Securities and Exchange Commission announced the adoption of rules and amendments to require certain documents, including Form ADV-NR, filed by investment advisers, institutional investment managers, and certain other entities to be filed or submitted electronically. Form ADV-NR is the appointment of agent for service of process by a non-resident general […]

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In today’s press release, the Securities and Exchange Commission announced the adoption of rules and amendments to require certain documents, including Form ADV-NR, filed by investment advisers, institutional investment managers, and certain other entities to be filed or submitted electronically. Form ADV-NR is the appointment of agent for service of process by a non-resident general partner or a non-resident managing agent of any investment adviser (domestic or non-resident), including exempt reporting advisers. The amendments also make technical amendments to modernize Form 13F and enhance the information provided. The new rules and form amendments will be effective 60 days after publication in the Federal Register. The amendments to Form 13F will be effective on January 3, 2023.

The press release is available HERE and text of the Final Rules is available HERE.

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SEC Division of Examinations Announces 2022 Examination Priorities https://www.investmentfundlawblog.com/sec-division-of-examinations-announces-2022-examination-priorities/ 2022年3月30日 22:36:54 +0000 https://www.investmentfundlawblog.com/?p=1859 Enhanced Focus on Private Funds, ESG, and Operational Resiliency The Securities and Exchange Commission’s Division of Examinations today announced its 2022 examination priorities. The Division will focus on private funds, environmental, social and governance (ESG) investing, retail investor protections, information security and operational resiliency, emerging technologies, and crypto-assets. The Division will focus on registered investment […]

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Enhanced Focus on Private Funds, ESG, and Operational Resiliency

The Securities and Exchange Commission’s Division of Examinations today announced its 2022 examination priorities. The Division will focus on private funds, environmental, social and governance (ESG) investing, retail investor protections, information security and operational resiliency, emerging technologies, and crypto-assets.

The Division will focus on registered investment advisers (RIAs) who manage private funds. Examinations will review issues under the Advisers Act, including an adviser’s fiduciary duty, and will assess risks, including a focus on compliance programs, fees and expenses, custody, fund audits, valuation, conflicts of interest, disclosures of investment risks, and controls around material nonpublic information. The Division will also review private fund advisers’ portfolio strategies, risk management, and investment recommendations and allocations, focusing on conflicts and disclosures around these areas. In addition, the Division will review the practices, controls, and investor reporting around risk management and trading for private funds with indicia or signs of systemic importance.

The SEC press release is here. The full priorities memorandum is here.

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SEC Proposed Rules to update beneficial ownership reporting https://www.investmentfundlawblog.com/sec-proposed-rules-to-update-beneficial-ownership-reporting/ 2022年2月10日 22:47:56 +0000 https://www.investmentfundlawblog.com/?p=1851 The SEC today proposed rule amendments to update beneficial ownership reporting under 1934 Act Sections 13(d) and 13(g). The proposed amendments to Regulation 13D-G would: accelerate the filing deadlines for Schedule 13D beneficial ownership reports from 10 days to five days and require that amendments be filed within one business day (which has been the […]

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The SEC today proposed rule amendments to update beneficial ownership reporting under 1934 Act Sections 13(d) and 13(g).

The proposed amendments to Regulation 13D-G would:

  • accelerate the filing deadlines for Schedule 13D beneficial ownership reports from 10 days to five days and require that amendments be filed within one business day (which has been the practice for amendments since the 1985 Cooper Labs SEC decision);
  • generally accelerate the filing deadlines for Schedule 13G beneficial ownership reports (which differ based on the type of filer);
  • accelerate the filing deadlines for Schedule 13G amendments
  • expand the application of Regulation 13D-G to certain derivative securities;
  • clarify the circumstances under which two or more persons have formed a “group” that would be subject to beneficial ownership reporting obligations; provide new exemptions to permit certain persons to communicate and consult with one another, jointly engage issuers, and execute certain transactions without being subject to regulation as a “group;” and
  • require that Schedules 13D and 13G be filed using a structured, machine-readable data language.

The Fact Sheet summarizing the proposed amendments:

https://www.sec.gov/files/33-11030-fact-sheet.pdf

Text of proposed rule amendments:

https://www.sec.gov/rules/proposed/2022/33-11030.pdf

Please contact your Pillsbury investment management attorney with any questions.

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SEC Proposes Amendments to Enhance Private Fund Reporting https://www.investmentfundlawblog.com/sec-proposes-amendments-to-enhance-private-fund-reporting/ 2022年1月27日 23:33:48 +0000 https://www.investmentfundlawblog.com/?p=1846 The Securities and Exchange Commission today voted to propose amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds. The proposed amendments are designed to enhance the Financial Stability Oversight Council’s (FSOC) ability to assess systemic risk as well as to bolster the Commission’s regulatory oversight of private fund […]

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The Securities and Exchange Commission today voted to propose amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds. The proposed amendments are designed to enhance the Financial Stability Oversight Council’s (FSOC) ability to assess systemic risk as well as to bolster the Commission’s regulatory oversight of private fund advisers and its investor protection efforts in light of the growth of the private fund industry.

The proposed amendments would require current reporting for large hedge fund advisers and advisers to private equity funds. These advisers would file reports within one business day of events that indicate significant stress at a fund that could harm investors or signal risk in the broader financial system. The proposed amendments would provide the Commission and FSOC with more timely information to analyze and assess risks to investors and the markets more broadly.

The proposal also would decrease the reporting threshold for large private equity advisers from 2ドル billion to 1ドル.5 billion in private equity fund assets under management. Lowering the threshold would result in reporting on Form PF that continues to provide robust data on a sizable portion of the private equity industry. Finally, the proposal would require more information regarding large private equity funds and large liquidity funds to enhance the information used for risk assessment and the Commission’s regulatory programs.

Continue Reading …

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Gensler SEC Expands Scope of Insider Trading Enforcement https://www.investmentfundlawblog.com/gensler-sec-expands-scope-of-insider-trading-enforcement/ 2021年8月31日 16:43:11 +0000 https://www.investmentfundlawblog.com/?p=1837 Recent enforcement action could signal expanding the boundaries of misappropriation theory, with significant implications for SEC-regulated entities and other market participants. TAKEAWAYS With Chair Gensler at the helm, an emboldened SEC Enforcement Division will continue to take aggressive positions in insider trading enforcement actions and is willing to test the contours of insider trading law […]

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Recent enforcement action could signal expanding the boundaries of misappropriation theory, with significant implications for SEC-regulated entities and other market participants.

TAKEAWAYS

  • With Chair Gensler at the helm, an emboldened SEC Enforcement Division will continue to take aggressive positions in insider trading enforcement actions and is willing to test the contours of insider trading law in litigation.
  • The Panuwat enforcement action advances the novel theory that possessing confidential information about one issuer may preclude trading in the securities of competitors and other companies in a business sector.
  • In light of the increased risk posed by the Panuwat matter, regulated entities and other market participants should review their policies and procedures to ensure that they are reasonably designed and tailored to
    prevent the misuse of material nonpublic information.

On August 17, 2021, the U.S. Securities and Exchange Commission (SEC) charged a former pharmaceutical company executive with insider trading for purchasing the securities of a rival company based on confidential information he learned about his own employer’s contemplated merger with another pharmaceutical company. The SEC’s enforcement action, which is being litigated in the United States District Court for the Northern District of California, appears to confirm early predictions that the SEC, with Chair Gary Gensler at the helm, would aggressively police the securities markets for insider trading.

READ MORE . . .

Read this article and additional Pillsbury publications at Pillsbury Insights.

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Dollar Threshold Change for "Qualified Client" Definition under the Investment Advisers Act https://www.investmentfundlawblog.com/dollar-threshold-change-for-qualified-client-definition-under-the-investment-advisers-act/ 2021年8月11日 16:26:34 +0000 https://www.investmentfundlawblog.com/?p=1833 Most 3(c)(1) private equity and hedge funds are impacted; exempt venture capital funds are not impacted. Effective August 16, 2021, the dollar thresholds specified in the definition of "qualified client" under Rule 205-3 of the Investment Advisers Act of 1940, as amended ("Advisers Act") will increase (i) from 2ドル.1 million to 2ドル.2 million (net worth […]

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Most 3(c)(1) private equity and hedge funds are impacted; exempt venture capital funds are not impacted.

Effective August 16, 2021, the dollar thresholds specified in the definition of "qualified client" under Rule 205-3 of the Investment Advisers Act of 1940, as amended ("Advisers Act") will increase (i) from 2ドル.1 million to 2ドル.2 million (net worth test) and (ii) from 1ドル million to 1ドル.1 million (assets under management (AUM) test). Clients that enter into investment advisory agreements (and existing fund investors that make additional fund investments) in reliance on the net worth test prior to the effective date will be "grandfathered" in under the prior net worth threshold. The increases are made pursuant to a five-year inflation adjustment required by section 205(e) of the Advisers Act (section 419 of the Dodd-Frank Act). (The most recent prior change was effective August 15, 2016.)

Section 205(a)(1) of the Advisers Act generally restricts an investment adviser from entering into, extending, renewing, or performing any investment advisory contract that provides for compensation to the adviser based on a share of capital gains on, or capital appreciation of, the funds of a client ("performance compensation prohibition"). Rule 205-3 of the Advisers Act provides a limited exemption from the performance compensation prohibition and permits investment advisers to receive performance-based compensation (incentive allocations, carry, carried interest, performance fee etc.) from "qualified clients."

After August 16, a "qualified client" is a person that:

(i) has at least 1ドル.1 million in assets under management with the investment adviser immediately after entering into the advisory contract (AUM test); or

(ii) has a net worth (in the case of a natural person client, together with assets held jointly with a spouse) that the investment adviser reasonably believes is in excess of 2ドル.2 million immediately prior to entering into the advisory contract (net worth test).

As a reminder, the value of a natural person’s primary residence must not be included in net worth; indebtedness secured by the person’s primary residence, up to the estimated fair market value of the primary residence at the time the investment advisory contract is entered into, need not be counted as a liability toward net worth (except that debt acquired or a loan amount increased within 60 days before investment or contract execution date must be counted); and indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the residence also must be counted as a liability.

A qualified client also includes both a "qualified purchaser" as defined in section 2(a)(51)(A) of the Investment Company Act of 1940, as amended (the "Investment Company Act"), and an investment adviser’s "knowledgeable employees." The newly revised definition will, therefore, affect certain private investment funds that rely on Section 3(c)(1) of the Investment Company Act (but not those funds relying on Section 3(c)(7)) and separately managed accounts that charge performance fees.

Advisory clients that established an advisory relationship (signed a contract) before the effective date of the new thresholds will be "grandfathered" in under the prior net worth threshold. Investors in a private fund are considered, for these purposes, a client of the adviser (fund manager). Therefore, future investments in a fund by the same investor who first invested in that fund before August 16 also will be grandfathered at the prior dollar thresholds. However, managers of section 3(c)(1) funds should update their subscription agreements and other offering documents to reflect the new qualified client threshold for new investors who first invest after August 16, 2021. In addition, notably, existing investors in a 3(c)(1) fund of funds (investor fund) that first invests in a 3(c)(1) fund (investee fund) after the effectiveness of a new threshold would nevertheless each have to be qualified client under the new thresholds because the investor fund’s investment in the investee fund would count as a new advisory relationship.

Private fund advisers (hedge fund, private equity and venture capital fund managers) that rely on the federal ‘private fund adviser" exemption from investment adviser registration will not be impacted, including with respect to their 3(c)(1) funds. The Adviser’s Act performance compensation prohibition applies only to registered investment advisers but does not apply to investment advisers relying on the federal private fund adviser exemption (so called "exempt reporting advisers"). Certain states (e.g., California, Texas), however, mandate under their state equivalent private fund adviser exemptions that even exempt reporting advisers, other than exempt venture capital fund advisers, only charge a performance fee to qualified clients with respect to their 3(c)(1) funds. Therefore, while private fund advisers that qualify as "venture capital fund advisers" will not be impacted by the new qualified client thresholds, exempt reporting advisers that are private equity or hedge fund managers will have to comply with the qualified client standard in their 3(c)(1) funds under certain state laws.

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Please contact your attorney at Pillsbury’s Investment Funds Group for additional information.

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SEC Adopts Modernized Marketing Rule for Investment Advisers https://www.investmentfundlawblog.com/sec-adopts-modernized-marketing-rule-for-investment-advisers/ 2020年12月22日 18:44:15 +0000 https://www.investmentfundlawblog.com/?p=1820 Today, the Securities and Exchange Commission announced it had finalized reforms under the Investment Advisers Act to modernize rules that govern investment adviser advertisements and payments to solicitors. The amendments create a single rule that replaces the current advertising and cash solicitation rules. The final rule is designed to comprehensively and efficiently regulate investment advisers’ […]

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Today, the Securities and Exchange Commission announced it had finalized reforms under the Investment Advisers Act to modernize rules that govern investment adviser advertisements and payments to solicitors. The amendments create a single rule that replaces the current advertising and cash solicitation rules. The final rule is designed to comprehensively and efficiently regulate investment advisers’ marketing communications.

In the decades since the adoption of the current rules, advertising and referral practices have evolved. The technology used for communications has advanced, the expectations of investors seeking advisory services have changed, and the profiles of the investment advisory industry have diversified. The new marketing rule recognizes these changes and the Commission’s experience administering the current rules. The reforms will allow advisers to provide investors with useful information as they choose among investment advisers and advisory services, subject to conditions that are reasonably designed to prevent fraud.

"The marketing rule reflects important updates to the traditional advertising and solicitation regimes, which have not been amended for decades, despite our evolving financial markets and technology," said Chairman Jay Clayton. "This comprehensive framework for regulating advisers’ marketing communications recognizes the increasing use of electronic media and mobile communications and will serve to improve the quality of information available to investors. The new rule provides for an extended compliance period intended to provide advisers with a sufficient transition period, including to enable consultation with the Commission’s expert staff."

The rule replaces the current advertising rule’s broadly drawn limitations with principles-based provisions designed to accommodate the continual evolution and interplay of technology and advice, and includes tailored requirements for certain types of advertisements. For example, the rule will require advisers to standardize certain parts of a performance presentation in order to help investors evaluate and compare investment opportunities, and will include tailored requirements for certain types of performance presentations. Advertisements that include third-party ratings will be required to include specific disclosures to prevent them from being misleading. The rule also will permit the use of testimonials and endorsements, which include traditional referral and solicitation activity, subject to certain conditions.

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Commodity Pool Operators: Final Rule Amending Form CPO-PQR https://www.investmentfundlawblog.com/commodity-pool-operators-final-rule-amending-form-cpo-pqr/ 2020年10月07日 17:56:14 +0000 https://www.investmentfundlawblog.com/?p=1800 The Commodity Futures Trading Commission at its open meeting on Tuesday, October 6, unanimously approved a final rule adopting amendments to Form CPO-PQR for commodity pool operators (CPOs). The amendments to Form CPO-PQR (1) eliminate existing Schedules B and C of the form, except for the Pool Schedule of Investments; (2) amend the information requirements […]

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The Commodity Futures Trading Commission at its open meeting on Tuesday, October 6, unanimously approved a final rule adopting amendments to Form CPO-PQR for commodity pool operators (CPOs).

The amendments to Form CPO-PQR (1) eliminate existing Schedules B and C of the form, except for the Pool Schedule of Investments; (2) amend the information requirements and instructions to request Legal Entity Identifiers (LEIs) for commodity pool operators and their operated pools that have them, and to delete questions regarding pool auditors and marketers; and (3) make certain other changes due to the rescission of Schedules B and C, including the elimination of all existing reporting thresholds. Click here for the full press release.

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