Robin M. Bergen

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Last week brought Securities and Exchange Commission (“SEC”) enforcement developments that, in our view, demonstrate the SEC’s interest in pursuing cases against investment advisers for conduct that would have been restricted under the Private Fund Adviser Rules (“PFAR”) and that the SEC stated in the PFAR adopting release was inconsistent with advisers’ fiduciary obligations.  As expected – and as previewed in our Client Alert on the Fifth Circuit’s decision in June – the SEC clearly still intends to act on the same concerns it raised in PFAR and will use its examination and enforcement tools to scrutinize the same adviser practices that drove the rulemaking.Continue Reading SEC Enforcement Updates – Post-PFAR Developments

Earlier this month, the California State Budget released for approval by the state legislature included an updated version of Senate Bill 54 (the “VC Diversity Law”).  The latest version contains several updates to the VC Diversity Law, including revisions to the definition of “covered entity;” that said, as we discuss below, it is not clear that the scope of coverage will meaningfully differ.  The updates also delay the initial reporting date to March 1, 2026 (from the original date of March 1, 2025), and reflect a change to the California governmental division responsible for enforcing the law.Continue Reading California Updates Diversity Reporting Law for Venture Capital Funds to Start in 2026

What’s next after PFAR? In its highly-awaited June 5th opinion, the Fifth Circuit Court of Appeals vacated all of the SEC’s Private Fund Adviser rules (“PFAR”), agreeing with industry trade associations that the SEC lacked the necessary statutory authority to adopt PFAR. In our latest Client Alert, we examine the opinion, aspects of…

With its decision in Securities and Exchange Commission v. Keener (May 29, 2024), the U.S. Court of Appeals for the Eleventh Circuit has now twice in the span of four months affirmed a broad interpretation of who is considered a “dealer” for purposes of the securities laws. More specifically, the Eleventh Circuit upheld the Securities and Exchange Commission’s (“SEC”) position that a person engaged in the business of purchasing—for its own account—convertible debt notes from microcap issuers (also referred to as “penny-stock” companies), converting the notes into common stock, and selling that stock in the market meets the definition of a “dealer” under the Securities Exchange Act of 1934 (the “Exchange Act”), and must therefore be registered as a dealer with the SEC. The decision in Keener closely tracked the same Court’s decision in Securities and Exchange Commission v. Almagarby, Microcap Equity Group (February 14, 2024), in which the Eleventh Circuit agreed with the SEC that the plaintiff Almagarby had been acting as an unregistered “dealer” in violation of the Exchange Act by obtaining convertible debt of microcap companies for his own account, converting the debt into common stock, and then selling the stock. Continue Reading Keener, Almagarby, and the Scope of the “Dealer” Definition: Potential Implications for Fund Managers and other Investors

On June 5, 2024, the U.S. Court of Appeals for the Fifth Circuit issued its opinion on National Association of Private Fund Managers et. al. vs. Securities and Exchange Commission, the lawsuit brought by a group of trade associations representing the private funds industry against the Securities and Exchange Commission (“SEC” or the “Commission”) challenging the validity and enforceability of the SEC’s Private Fund Adviser Rules (“PFAR”). …
Continue Reading Fifth Circuit Vacates Private Fund Adviser Rules in Entirety  

On May 16, 2024, the Securities and Exchange Commission (the “Commission” or “SEC”) adopted a final set of amendments (the “Final Amendments”) to Regulation S-P (“Reg S-P”) to require “covered institutions,” which include SEC-registered investment advisers (“RIAs”) and broker-dealers, to adopt an incident response program for incidents involving unauthorized use of or access to customer data.  The Final Amendments also require customer notification where the covered institution determines the compromise of such data could create a reasonably likely risk of substantial harm or inconvenience to an individual identified with the information.  Continue Reading SEC Adopts Amendments to Reg S-P

On March 27, 2024, the U.S. Securities and Exchange Commission (“SEC”) announced amendments to the Internet Adviser Exemption, which permits investment advisers that provide advisory services through the internet (“Internet Investment Advisers”) to register with the SEC under the Investment Advisers Act of 1940 (“Advisers Act”) if they do not otherwise have enough assets under management to be eligible for registration.[1]  The final rule seeks to address technological and industry advancements since the original Internet Adviser Exemption was adopted in 2002.  The final rule also amends the interactive website requirement, eliminates the exception for advisers with de minimis non-internet clients, and imposes additional reporting requirements for Internet Investment Advisers on Form ADV.Continue Reading SEC Announces Reforms for Internet Investment Advisers

On March 18, 2024, the SEC announced two enforcement actions against investment advisers for so-called “AI-washing” and violations of the Marketing Rule.  Using the playbook from the Enforcement Division’s “green-washing” cases in the ESG space, the SEC found that the two investment advisers marketed that they were using AI in certain ways, when in fact, the advisers were not. Continue Reading SEC Announces “AI-Washing” Cases Against Investment Advisers

On February 15, 2024, the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) released a notice of proposed rulemaking (the “Proposed Rule”)[1] that would impose anti-money laundering/countering the financing of terrorism (“AML/CFT”) compliance obligations on SEC-registered investment advisers (“RIAs”) and exempt reporting advisers (“ERAs”) pursuant to the Bank Secrecy Act (the “BSA”), taking steps to close a perceived gap in the AML/CFT defenses of the U.S. financial system. FinCEN estimates more than 15,000 RIAs and almost 6,000 ERAs may be covered by the Proposed Rule, including many advisers that are located outside the United States but have registered (or file reports) with the SEC because they have U.S. clients. Continue Reading FinCEN Tries Again . . . to Impose AML Requirements on Investment Advisers

On November 14, the Securities and Exchange Commission announced its enforcement results for the 2023 fiscal year,[1] with case numbers up from fiscal year 2022 and monetary sanctions at the second highest level in the agency’s history, though down significantly from last year’s record highs.  In a press release announcing the results, Enforcement Director Gurbir Grewal noted that the past year’s cases demonstrate how the agency “work[s] with a sense of urgency, using all the tools in our toolkit.”  This post evaluates how the SEC used its enforcement tools in the past year and surveys the enforcement highlights in key substantive areas.Continue Reading SEC Announces FY 2023 Enforcement Results with Second-Highest Penalties on Record