On Sept. 12, 2018, the U.S. Securities and Exchange Commission charged the principal of a hedge fund manager and the hedge fund manager itself with illegally profiting from a scheme to drive down the price of Ligand Pharmaceuticals Inc., generating approximately $1.3 million in illegal profits. The SEC’s complaint charges that Gregory Lemelson and Massachusetts-based Lemelson Capital Management LLC issued false information about Ligand after Lemelson took a short position in Ligand on behalf of The Amvona Fund, a hedge fund LCM advised and Lemelson partly owned.

The regulatory action follows the Commission’s stated objective of protecting retail investors and is a continuation of a multi-year effort by the SEC to monitor hedge funds (and others) using social media to disseminate information about public companies.

To read more, click here.

On Aug. 27, 2018, the U.S. Securities and Exchange Commission announced settlements with a U.S.-based registered investment adviser, several of its affiliates and two of its executives for alleged misconduct involving quantitative investment models that contained numerous errors.

These settlements, especially when placed in the context of other recent enforcement efforts related to quantitative and systematic trading strategies, make it clear that the SEC staff will utilize its anti-fraud powers to sanction investment advisers employing systematic or quantitative investment strategies that do not design and administer supervisory programs specifically designed to effectively address the risks inherent in algorithmic and similar investment techniques or that do not have accurate, current disclosures on those investment programs. The Aug. 27 settlements also reinforce a broader trend in holding senior personnel of investment advisers personally liable for their roles in causing an adviser’s violations.

To read more, click here.

On July 31, 2018, the Office of the Comptroller of the Currency (“OCC”) issued a news release announcing that it will begin accepting special purpose national bank (“SPNB”) charter applications from fintech companies that do not take deposits but are engaged in the business of lending money or paying checks (including the modern equivalent thereof, which the OCC suggests includes issuing debit cards or otherwise facilitating payments electronically). The OCC’s decision was announced shortly after the U.S. Department of the Treasury released an extensive report endorsing SPNB charters for fintech companies. As part of its announcement, the OCC also published a Policy Statement on Financial Technology Companies’ Eligibility to Apply for National Bank Charters as well as a supplement to the Comptroller’s Licensing Manual.

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On July 18, 2018, the U.S. Securities and Exchange Commission approved amendments to Regulation ATS and Rule 3a1-1 under the Securities Exchange Act of 1934, as amended. The Amendments impose extensive new transparency requirements on alternative trading systems (“ATSs”) that effect transactions in NMS Stocks. With the increase in regulatory burdens associated with operating an NMS Stock ATS and the new requirement to disclose potentially sensitive business information, the competitive landscape among NMS Stock ATSs could be extremely altered. Click here to read more.

On July 11, 2018, the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert focusing on the most common deficiencies relating to best execution found by the SEC staff in recent examinations of investment advisers. The Risk Alert provides a snapshot of OCIE’s expectations regarding a fund manager’s best execution policies and procedures.

Click here to read more about how OCIE’s recent Risk Alert will affect private fund managers.

In late June 2018, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) took action on a number of fronts, including re-implementing stricter sanctions against Iran, issuing detailed sanctions regulations under the Global Magnitsky Human Rights Accountability Act (“Global Magnitsky Act”) and easing sanctions against Sudan. Firms that engage in business that touches upon Iran or Sudan should carefully review these changes. Moreover, firms should make sure to incorporate the names of individuals designated under the Global Magnitsky Act into their screening process.

Click here to read more about these sanctions and the effects they may have on your business.

For information regarding recently updated Venezuela- and Ukraine/Russia-related sanctions, click here.

For information regarding OFAC’s list of sanctioned individuals and entities, click here.

For information regarding the U.S. Department of the Treasury’s list of Russian political figures and oligarchs, click here.

On May 22, 2017, the U.S. Commodity Futures Trading Commission amended and supplemented several CFTC regulations to strengthen anti-retaliation protections for whistleblowers under the Commodity Exchange Act. These amendments, in general, make the CFTC’s whistleblower protections consistent with those afforded by Securities and Exchange Commission rules and reinforce the need for private fund managers that are registered as commodity pool operators or commodity trading advisors to take affirmative steps to avoid violating federal regulations regarding whistleblowing.

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A proliferation of different fee levels and structures is evident throughout the alternative investment industry, and business development companies (BDCs) are no exception. For instance, management and incentive fees within the BDC space vary widely between issuers, with management fees ranging from as low as 1 percent to as high as 2 percent of gross assets. Throughout the industry, common drivers for revisiting existing fee structures include changing market norms and pressure from investors.

Click here to read this article in which partner John Mahon talks to The Hedge Fund Journal about new BDC fee structures and future fee trends.