The United Arab Emirates (UAE) is a high-quality financial center and tax-favorable jurisdiction with political stability and a good legal system that is based on the U.K. model. Several large fund managers have set up in the Middle East, which has strengthened the jurisdiction’s credibility and encouraged smaller managers to make the move. The UAE’s positive attributes are even more attractive as other jurisdictions around the globe are faced with political uncertainty and less favorable tax laws. To address some of the key issues for the growing number of fund managers interested in establis ..read more

Insider trading is another perennial focus area for the SEC. Its regulations require both investment advisers and broker-dealers to adopt and implement reasonably designed policies and procedures for preventing misuse of material nonpublic information (MNPI), such as the use of information barriers. The SEC commenced a civil enforcement action against a broker-dealer for failing to implement appropriate information barriers between the proprietary and customer-facing trading operations, arguing that traders’ unfettered access to customer MNPI rendered public statements about controls materiall ..read more

Rule 206(4)‑7 under the Investment Advisers Act of 1940, commonly known as the “Compliance Rule,” requires advisers to review the adequacy and effectiveness of their compliance policies and procedures. One of the essential tools advisers use to fulfill their obligations under the Compliance Rule is testing. An ACA Group presentation, part of its “Building a Gold Standard Compliance Program” series, examined the role of testing in a compliance program; hallmarks of effective testing; and testing design and implementation. The program featured L. Allison Charley, directo ..read more

Conflicts of interest are a perennial SEC priority. To assist advisers in identifying and mitigating conflicts, a panel of senior private fund in-house counsel at the PLI Advanced Issues in Private Funds 2023 program took an in-depth look at the most common conflicts of interest faced by private fund managers and the ways managers mitigate those conflicts. The panelists drew from their firms’ experiences in addressing expense and investment allocations; valuation; exposure to different levels of a company’s capital structure; transactions with affiliates; and side letters. The program fea ..read more

One of the practical applications of distributed ledger technology, or blockchain, is evidencing ownership of assets. So-called “tokenization” or “digitalization” of assets could improve accuracy and accountability; streamline transfers and payment flows; and provide greater liquidity. At the same time, digitalization faces multiple challenges, especially significant regulatory uncertainty. A recent program presented by IFI Global and Jersey Finance examined the current tokenization landscape, its potential benefits, the challenges hindering broader adoption and where tokenization is head ..read more

In August 2023, the SEC adopted five new rules (Rules) for advisers to private funds, which, among other things, mandate quarterly fee, expense and performance reporting to investors (quarterly statements). The Rules “materially increase the compliance burden for private fund advisers and represent a dramatic shift in the relationship between investors and advisers,” said K&L Gates partner TJ Bright at a recent CFA Institute program devoted to the quarterly statement requirement. The program examined which funds are covered by the Quarterly Statement Rule, its detailed ..read more

Many hedge fund managers and other financial services firms have been using artificial intelligence (AI) to some extent for a long time. The arrival of ChatGPT’s generative AI (Gen AI) technology on the scene, however, has brought new focus on the disruptive power of AI. The Alternative Investment Management Association (AIMA) recently asked more than 150 hedge fund managers about their uptake of Gen AI, its potential benefits and how it may affect fund management. Notably, a majority of the managers in the study permit their staff to use outside Gen AI tools. AIMA’s report ..read more

Two years ago, the SEC proposed a significant expansion of the definition of “dealer” intended to capture certain unregistered firms that provide liquidity to the securities markets and act as market makers (Proposed Rules). On February 6, 2024, the SEC adopted final rules (Rules) updating the definitions of “dealer” and “government securities dealer” under the Securities Exchange Act of 1934. Notwithstanding commenters’ requests, the SEC did not include a blanket exclusion for registered investment advisers or private funds but did make some modifications narrowing the sco ..read more

Cyber insurance is a critical part of cyber incident response, but it comes with some coverage challenges. This article distills insights offered during an Incident Response Forum Ransomware 2024 panel that focused on key issues around cyber insurance, including avoiding pitfalls in the application and claims processes; navigating ransom payments; retaining mitigation service providers following an attack; parsing and negotiating cyber policies; and handling issues around third-party cyber incidents. The panel was moderated by John Reed Stark, founder of John Reed Stark Consulting, and fe ..read more

The European Sustainable Finance Disclosure Regulation (SFDR), officially known as Regulation EU 2019/2088, has been in effect for nearly two years. However, the regulatory landscape for sustainable investment disclosures continues to pose challenges for participants in the financial markets. The recent implementation of Delegated Regulation EU 2022/1288 has brought about significant changes by introducing more comprehensive rules governing the disclosure requirements established under the SFDR. In addition, the European Commission (EC) conducted a comprehensive assessment of the SFD ..read more