On Sept. 28, 2018, the Commodity Futures Trading Commission filed a civil enforcement action against EOX Holdings LLC, an introducing broker, and one of its registered associated persons, Andrew Gizienski. The CFTC’s complaint, which charges that EOX Holdings and Gizienski misused material, nonpublic information in connection with block trades of energy contracts on the ICE Futures U.S. exchange, represents the latest assertion of CFTC jurisdiction over the relatively new concept of illegal insider trading in the commodity futures, options and swaps markets.

More importantly, on that same day, the CFTC also announced the formation of a special insider trading task force within the CFTC’s Division of Enforcement. The new Insider Trading and Information Protection Task Force aims to identify incidents of potential insider trading in the commodity derivatives markets and to bring charges for illegal insider trading. It is a national effort that draws on several CFTC offices for personnel and support.

Taken together, these steps make it clear that the CFTC is actively trying to expand the scope of its traditional enforcement role and to nurture the growth of traditional insider trading principles in the commodity derivatives markets. The fact that the CFTC is voluntarily undertaking to grow its capabilities in this area, at a time when its overall budget is seen by many observers as not being sufficient to support its growing scope of overall responsibility, only underscores the agency’s determination. Managers that actively trade in this space should ensure that they understand the scope of the CFTC’s new role and that they address the various risks raised by their trading and investment strategies.

To read more about the CFTC’s increasing insider trading enforcement efforts and what the implications are for private fund managers, click here.

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.

The past year has been mixed for alternative funds. In the hedge fund space, industry assets under management increased by $70 billion to $3.22 trillion, despite lackluster overall returns and noisy withdrawals by certain institutional investors. In the private equity space, industry assets under management grew 4.2 percent to $2.49 trillion, and 8,975 new funds were launched. Regulatory requirements and investor preference for established managers have increased barriers to entry in both sectors. Meanwhile, competition for investor capital has created a buyer’s market with significant negotiation of fund terms.

Click here to read this article in which partner Stephanie Breslow and associate Patrick Dundas discuss current industry trends affecting hedge and investment funds and provide information regarding regulatory developments impacting the market.

In a typical private equity fund, investors are making capital commitments to a limited partnership that will be drawn down over a number of years at the direction of the general partner of the limited partnership. The structure of the typical private equity fund and the fact that investors have no liquidity once they make their investments in a fund means that investors are often concerned about what happens if things go wrong with the fund.

Read partner Omoz Osayimwese’s discussion of the various remedies investors typically negotiate for in a private equity fund.

In this SRZ Insights video, partners Eleazer Klein and Michael E. Swartz discuss the impact of Section 16(b), the short-swing profit rule that requires corporate insiders to disgorge any profits from trades made within six months of each other. In addition, the partners address how short-swing profit litigation is affecting hedge funds and talk about recent cases brought against fund managers.

Although the U.S. Department of Labor’s (DOL) new Fiduciary Duty Rule is set to become effective on April 10, 2017, President Trump has taken action that may delay and possibly prevent the rule from becoming effective. On Feb. 3, 2017, President Trump signed a presidential memorandum that directs the secretary of the DOL to reanalyze the economic and legal impact of the Fiduciary Duty Rule.

Click here to read more about what the DOL is directed to consider.

In a recent interview with Private Funds Management, partners Stephanie Breslow, Omoz Osayimwese, Phyllis Schwartz and Joseph Smith discuss fund agreements between LPs and GPs, which are under constant scrutiny. The partners discuss recent changes, co-investment rights and key terms that are crucial in the current market.

Click here to read the interview.

Hedge fund seeding brings with it a variety of structures and arrangements, as there is not a one-size-fits-all system for seed deals. Though hedge fund seeding remains an active component of the start-up market and an important part of the business, it may not be as critical to launching as it was a few years ago.

Click here to read The Hedge Fund Journal article in which partners David Efron and David Nissenbaum discuss the varying and complex situations surrounding hedge fund seeding.

Hedge fund managers are thinking about succession planning earlier on than they used to, and they want to have clear plans in place as part of the drive to become more institutionally palatable — and sometimes to help facilitate strategic deals.

Click here to read this article, in which The Hedge Fund Journal talks to SRZ partners Stephanie R. Breslow, Jennifer Dunn, Steven J. Fredman, Jason S. Kaplan and David Nissenbaum about key considerations for hedge fund managers thinking about succession planning.