Monthly Archives: May 2013

Regulation A+ Deadline Passed by Congress

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Part of JOBS Act Regulations to be Finalized by October 31, 2013

On Wednesday May 15, the House of Representatives passed H.R. 701 which requires the SEC to finalize regulations with respect to “Regulation A+” of the JOBS Act. Regulation A+ would allow companies to more effectively raise money from the public, increasing the current offering limit of $5 million over 12 months to a limit of $50 million over 12 months.

House Statement on Regulation A+

The House Financial Services Committee released a statement which includes the following:

Specifically, H.R. 701 requires the SEC to implement Title IV of the JOBS Act by October 31, 2013. Title IV requires the SEC to adopt or amend regulations to encourage capital formation without requiring an SEC registration statement. These exemptions, referred to as “Regulation A+,” create a new category of public offerings exempt from SEC registration of up to $50 million raised over a 12-month period through issuance of equity securities, debt securities or debt securities convertible or exchangeable to equity interests, including any guarantees of such securities. Under current law, Regulation A provides a similar exemption for public offerings up to $5 million over 12 months.

To protect investors, the JOBS Act requires companies that make offerings under Regulation A+ to file audited financial statements with the SEC on an annual basis and gives the SEC the ability to require these issuers to make periodic disclosures about their operations, financial condition, use of proceeds and other information it deems appropriate.

What this means for the hedge fund industry

Right now this means little to the hedge fund industry except perhaps that Congress is getting tired of the SEC dragging their feet with respect to implementing the JOBS Act. As we have discussed previously, the major provision for fund managers is going to be the lifting of the ban on general solicitation. Perhaps this action indicates that Congress is going to continue to push the SEC to finalize all of the provisions of the JOBS Act.

Additionally, depending on the final Regulation A+ regulations, fund managers may be more inclined to start using that exemption instead of Rule 506 Regulation D, which is the de facto safe harbor used by fund managers. Our guess is that we will not see any real action on this issue until after mid-year and so we cannot know how this particular regulation may or may not affect managers for a few months.

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Cole-Frieman & Mallon LLP provides legal advice to the hedge fund industry.  Bart Mallon can be reached directly at 415-868-5345.

SALT Conference 2013

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Today the SALT conference starts in Las Vegas.  Continuing through the end of the week, the hedge fund industry will be descending upon the Bellagio for scheduled speakers, general information sessions and, of course, networking.  This year featured speakers include Nicolas Sarkozy, John Paulson and Coach K; other speakers include major players in the industry including my friend and law school classmate Omeed Malik who is head of the Emerging Manager Program at Bank of America Merrill Lynch.

For more information on the conference, see their website here.

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Cole-Frieman & Mallon LLP provides legal services to the investment management industry.  Bart Mallon can be reached directly at 415-868-5345.

Hedge Fund Events May 2013

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The following are various hedge fund events happening this month. Please email us if you would like us to add your event to this list.

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May 1-3

May 6-7

May 7-8

May 7-8

May 7-10

  • Sponsor: SkyBridge Capital
  • Event: SALT 2013
  • Location: Las Vegas, NV

May 8

May 9

May 13

  • Sponsor: Deal Flow Media
  • Event: SPACs
  • Location: New York, NY

May 13-15

May 14

May 14

May 14-15

May 15

May 15

May 15

May 15

May 15-16

May 15-17

May 16

May 16

May 16

May 16-17

May 16-17

May 20

May 20-21

May 22

May 22

May 22-23

May 23

  • Sponsor: 100WHF
  • Event: Spring Fling
  • Location: San Francisco, CA

May 29-30

May 29-31

May 30

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Cole-Frieman & Mallon LLP provides legal services for hedge fund managers and other groups within the investment management industry. Bart Mallon can be reached directly at 415-868-5345.

Outsourced Compliance Company – Sansome Strategies LLC

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Clients, Friends and Readers:

We are pleased to announce the launch of Sansome Strategies LLC, a high-touch outsourced compliance company.  Sansome Strategies will focus on RIAs and hedge fund managers as well as those firms operating in the commodities/futures and derivatives spaces.

As we all know, increased regulatory oversight, through both the passage of laws and the promulgation of new regulations, have changed (and will continue to change) the operating landscape for investment managers.  This is no more true than in the derivatives space where managers have now found themselves subject to CFTC oversight.  Combined with the Dodd-Frank mandate requiring hedge fund and private equity fund managers to register as investment advisers, the demand for outsourced compliance consulting services has dramatically increased.

Sansome Strategies enters the consulting space at this important time and aims to provide both large and small managers with competent and practical consulting advice.

The press release announcing the launch is found below.  For more information, please see the Sansome Strategies website.

Please also visit the Sansome Strategies blog, ComplianceFocus.

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Sansome Strategies LLC Introduced as New Compliance Consulting Firm with Commodities Focus

San Francisco-Based Firm Specializes in Outsourced CCO Services

SAN FRANCISCO, CA – May 2, 2013 – Announced today is the launch of Sansome Strategies LLC, a compliance consulting firm specializing in high-touch, outsourced compliance services for firms in the investment management industry. Aiding hedge fund managers, commodity pool operators and CTAs, private equity firms, futures managers, and other investment managers, Sansome Strategies offers expertise in streamlining regulatory processes and tailoring compliance outsourcing arrangements to a business’ specific needs.

Sansome Strategies’ head of compliance operations is Jennifer Dickinson, who has extensive experience with private fund compliance, both with respect to investment adviser and futures regulation. Prior to joining Sansome Strategies, Dickinson was a Senior Compliance Consultant at Gordian Compliance Solutions, LLC. Dickinson has been a Chief Compliance Officer at several large investment managers, and worked at the law firms of Cole-Frieman & Mallon LLP and Pillsbury Winthrop Shaw Pittman LLP. “Sansome Strategies will be a perfect fit for those firms seeking one-off compliance solutions, as well as firms that need an institutional quality compliance consultant,” Dickinson said. Ghufran Rizvi, COO of Standard Pacific Capital, LLC in San Francisco agrees, “I have known Ms. Dickinson for many years. She is a great business partner and Sansome Strategies will be a valuable addition to the compliance consulting space.”

Sansome Strategies’ expertise with futures managers and commodity pool operators differentiates the firm in a crowded field and is unique in the compliance consulting industry. The firm is backed by Karl Cole-Frieman and Bart Mallon, partners and founders of Cole-Frieman & Mallon LLP, which has one of the largest private fund practices in California. “There is significant and increasing demand for a compliance firm that understands both registered investment advisers and CFTC registered firms,” according to Karl Cole-Frieman. “Changes in the CFTC’s registration and exemption requirements have forced more managers into registration,” Bart Mallon notes, “and we have not seen the existing compliance companies prepared to address this demand.”

With Sansome Strategies, clients can pick and choose from an array of options, including a completely or partially outsourced compliance program, or opt for advisory, educational, or training services only. Sansome Strategies collaborates with business management and staff to structure, implement, and maintain their compliance program. Sansome Strategies features a client-centric business model, putting a heavy focus on customized services and collaboration.

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About Sansome Strategies

Headquartered in San Francisco and with a nation-wide scope of services, Sansome Strategies is a compliance consulting firm specializing in high-touch, outsourced compliance services for businesses in the investment management industry. Serving investment advisers, futures managers, hedge funds, broker-dealers, private equity firms and businesses ranging from entrepreneurial start-ups to multi-billion dollar international institutions, Sansome Strategies prides itself on tailoring compliance management solutions to the unique needs of each client. Comprised of securities industry professionals with years of experience in the financial and regulatory industries, Sansome Strategies’ mission is to simplify the compliance process, minimize risk, and lower costs, with the core goal of helping clients focus on building and enhancing their business. The firm also publishes ComplianceFocus a compliance blog designed to be a practical and accessible resource to the investment management community. For more information please visit Sansome Strategies at: http://sansomestrategies.com.

For more information, please contact:

Jennifer Dickinson
Sansome Strategies LLC
415-762-8753

Mock Exam Tips from ComplianceFocus.com

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Occasionally we will have the opportunity to post articles which originally appeared on other websites and today we are republishing an article from compliancefocus.com on the topic of mock examinations.

The following article can be found at the ComplianceFocus blog here.

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7 Tips to Get the Most Out of Your Mock Examination

A mock exam can be a useful tool in many contexts, for example taking the place of your annual review, or helping growing managers transition from exempt reporting advisers or state registrants to SEC registration. Most importantly, it is an invaluable exercise in preparing existing SEC registrants for the inevitable real thing. The following tips will help you make the most of the mock exam experience:

1. Retain a consultant to perform the exam. Ideally this will be a consultant who is not already familiar with your business – either another team member from your current consulting firm or an entirely new firm. A mock exam conducted by internal compliance personnel is likely to be less formal and, however inadvertently, less objective.

2. Think locally. Look first to consultants in your area, who will be able to perform onsite interviews and other tasks with a minimum of expense. If you do retain a consultant that must travel, be prepared to pay for airfare, lodging and related expenses. Depending on your budget, this could be a limiting factor both in your choice of consulting firms and in the scope and realism of the exam. Consultants are often willing to conduct interviews by telephone, but this may diminish the “real thing” experience.

3. Go through your counsel. Your counsel may have referrals to compliance consultants and will likely have valuable feedback on the report that is ultimately created based on the exam. It is also worth noting that your counsel can retain the consultant on your behalf, which makes the exam and its results confidential under the attorney-client privilege.

4. Treat it like the real thing. Particularly if the examiner is familiar with your business or has access to your information (e.g., another consultant at the firm you currently use), you should treat the mock exam like it is the real thing, including the following:

a. Do not expect the examiner to use or rely on information already in the consulting firm’s files. Instead, produce all documents and information relevant to the request. Do not assume that the examiner has any background or other information on the questions s/he asks.

b. Even if your examiner has not specified a deadline, set internal deadlines, such as the final deadline to produce all requested documents and any interim deadlines for information or documents to be gathered by particular employees or departments.

c. Make your written responses to the document/information request as professional as possible, as if you were responding to a regulator.

d. If a particular request is not applicable, mark it as such in your response to the document request. Do not assume that the examiner knows it is inapplicable.

5. Ask for a risk-based exam. If you are registered with the SEC and using your mock exam to prepare for the real thing, ask prospective consultants if they can conduct as a risk-based “presence exam” per the SEC’s new protocol. While the initial interview and document request may not differ significantly from the traditional format, the examiner will ultimately identify a few higher risk areas for your firm and focus the bulk of the exam on those areas, including additional interviews and document/information requests.

6. Think about what keeps you up at night. Is there anything that would help your compliance team do better, be more efficient or fill in gaps in your compliance program? Consider asking the examiner for recommendations in these areas and include them in your report (see also Tip no. 3 above if you’re concerned about keeping these confidential). A recommendation from a reliable and objective third party may help you obtain additional resources internally to beef up your compliance program, e.g., to improve archiving and search capabilities for email surveillance, additional personnel or an online solution for trade review and the like.

7. Toot your own horn. Most positions or departments, regardless of the business or industry, face a moment when they have to justify their existence to management. Positives in your mock exam report are evidence of what your compliance team is doing well and should be highlighted in periodic meetings, your own internal compliance reviews and anywhere else they can be useful to you and your firm.

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Cole-Frieman & Mallon LLP run the Hedge Fund Law Blog in addition to their hedge fund law firm. Bart Mallon can be reached directly at 415-868-5345.

ComplianceFocus.com is a project by Sansome Strategies LLC, a high-touch outsourced compliance company.  Sansome Strategies is owned by the principals of Cole-Frieman and Mallon LLP.