what’s next on the alternative asset manager risk horizon?
DESCRIPTION
The information and opinions expressed by our panelists today are their own, and do not necessarily represent the views of their employers or of PLUS. The contents of these materials may not be relied upon as legal advice. A copy of the presentation slides will be available following this webinar, on the PLUS website at: www.plusweb.org 2TRANSCRIPT
What’s Next on the Alternative Asset Manager Risk Horizon?
The information and opinions expressed by our panelists today are their own, and do not necessarily represent the views of their employers or of PLUS. The contents of these materials may not be relied upon as legal advice.
A copy of the presentation slides will be available following this webinar, on the PLUS website at: www.plusweb.org
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MODERATOR:
PANELISTS:
Meet the Presenters
Elan Kandel, Member, Cozen O’Connor
Dennis Krause, Senior Vice President, Endurance Insurance Neil Lipuma, Senior Vice President, Hiscox USAM. Machua Millett, Esq., Managing Director, Marsh USA Mark Reilly, Senior Vice President, Ironshore Insurance
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THE SEC THREAT
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THE SEC THREAT
OCIE Presence Exam Areas of Focus: • Disclosure of specific fees and expenses• Conflicts of interest • Marketing materials and other information provided to
prospective clients and investors • Past performance figures • Valuation issues • Whistleblower confidentiality agreement issues• Real estate advisors
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THE SEC THREAT 2015 SEC Private Fund Enforcement Action Areas of Focus:
Fees and Expenses
In the Matter of KKR & Co. In the Matter of Alpha Titans, LLC, et al. In the Matter of The Blackstone GroupIn the Matter of Cherokee Investment Partners, LLC and Cherokee Advisers, LLC
Valuation
In the Matter of AlphaBridge Capital Management SEC v. Summit Asset Strategies Investment Management, LLC
Conflicts of Interest
In the Matter of Lyne Tilton, Patriarch Partners LLC, et al. In the Matter of Fenway Partners, LLCIn the Matter of JH Partners LLC
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THE SEC THREAT
On the SEC’s Horizon….
• Cybersecurity – First cybersecurity enforcement action: In the Matter of R.T. Jones
Capital Equities Management, Inc.
• Increased Whistleblower Protection – First SEC Action on Employee Confidentiality Agreements: In the
Matter of KBR, Inc.
– First SEC Whistleblower Retaliation Award: In the Matter of Paradigm Capital Management, Inc. and Candace King Weir
– Note current Circuit Court and SEC split on reporting requirements for whistleblowers: Will an internal report suffice?
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THE SEC THREAT
• Examinations of Advisers and Funds that Outsource Their Chief Compliance Officers
- OCIE November 9, 2015 Risk Alert
• SEC Activist Hedge Fund Collusion Investigation - Wall Street Journal reported in June 2015 that the SEC is
investigating whether activist investors skirted rules on disclosure of investments made with other funds
• SEC Pay-to Pay Compliance - Pay-to-Pay Rule Recently Upheld- Election year may invite SEC scrutiny
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THE SEC THREAT
• SEC Pre-IPO Investigation
– Investigation focused on whether a private fund adviser and its trading of pre-IPO company shares violated Dodd-Frank’s provisions regarding security-based swaps
• FCPA Concerns - January 7, 2015 NY Post reported that SEC is investigating
private equity firms paying middle men to assist in fundraising from sovereign wealth funds
- Impact of Yates Memo
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INSIDER TRADING UPDATE
• In the matter of Motazedi, CFTC Docket No. 16-02 (Dec. 2, 2015)
– Private fund managers that trade in commodity interests should take note
• United States v. Newman, 773 F.3d 438 (2d Cir.2014)
– Supreme Court denied cert. in October 2015
• United States v. Salman, 2015 WL 4068903 (9th Cir. July 6, 2015)
• In the Matter of Joseph Ruggieri, AP File No. 3-16178, ’34 Act Rel. No. 76614 (SEC Dec. 10, 2015)
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VALUATION LITIGATION
• Public Sector Pension Investment Board v. Saba Capital Management, L.P. et al. – Pending in the Supreme Court – New York County – Case involves valuation of investor’s interest in hedge funds– Motion to dismiss pending
• Norddeutsche Landesbank Girozentrale v. Patriarch Partners, LLC, et al. – Pending in the Supreme Court – New York County – Allegations mirror those made by the SEC – Motion to dismiss pending
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CYBER/SOCIAL ENGINEERING
• In July 2015, U.K. hedge fund Fortelus Capital Management’s CFO fell victim to a social engineering attack
• Some cyber policies contain a specific social engineering exclusion
• Causation issues may also serve as basis for denial of coverage: “direct loss”
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IPO LITIGATION RISKS
• 2014 was a record setting year for private-equity backed IPO volume
• Collateral consequences of an IPO: IPO related litigation • Case Study: Seaworld “Blackfish” litigation
– Derivative action pending in Delaware Chancery Court
– Blackstone shareholder entities and D&Os named as defendants
– Securities class action pending in the Southern District of California
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Portfolio Company Risks
Checker Cab Philadelphia v. Uber Technologies Inc. et al.• Google Ventures LLC named in RICO litigation based on its
investment in Uber
• Motion to dismiss remains pending
• Possible threat to the private equity investment model?
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Family Office Risks
• Growing number of family offices are making side-by-side investments with private equity firms
• Move away from passive investing/ risks associated with direct investing
• Case Study:
- In re Park Cent. Global Litig., No. 3:09-CV-765-M, (N.D. Tex. 2009): class action lawsuit filed by investor in hedge fund controlled by Perot Family Trust and other Perot-owned and controlled entities.
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MODERATOR:
PANELISTS:
Elan Kandel, [email protected]
Dennis Krause, [email protected] Lipuma, [email protected] M. Machua Millett, [email protected] Mark Reilly, [email protected]
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Questions
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Thank you for your time.
A replay of this webinar will be available to PLUS Members at:
www.plusweb.org