Author Archives: Hedge Fund Lawyer

Recent Enforcement Actions Illustrate the Need for Good Recordkeeping

SEC v. Gold Standard Mining Corp.

SEC v. Orthofix International N.V.

In the Matter of Altamont Global Partners

Since the end of June, there have been three enforcement actions dealing with inadequate or improper accounting methods that did not follow generally accepted accounting practices (GAAP). Two enforcements were brought by the SEC and one by the NFA. Gold Standard Mining Corp. and Altamont Global Partners involve making false statements regarding the value of assets. Orthofix deals with the failure to adopt and follow appropriate internal procedures to ensure proper accounting. We are providing an overview of these actions and some of our thoughts below.

SEC v. Gold Standard Mining Corp.

Gold Mining Corp. made false and misleading statements in filings with the SEC regarding the acquisition, operations, and assets of a Russian subsidiary.
Gold Mining Corp. filed fraudulent financial statements from 2009-2011 that did not follow GAAP. Revenues were not reported accurately, and assets were grossly inflated. For example, one asset, a hotel, was valued as $3MM per room.
Gold Mining Corp. also failed to disclose a profit sharing agreement with the former owner of the Russian subsidiary.

The complaint can be found here.

SEC v. Orthofix International N.V.

Wholly owned Mexican subsidiary of Orthofix, Promeca, paid $317,000 in bribes to Mexican officials in order to obtain sales contracts from the Mexican government.
Promeca employees referred to the bribes as “chocolates” and fraudulently recorded the transactions as cash advances or promotional and training expenses.
Prior to the discovery of the bribery scheme, Orthofix did not have an effective Foreign Corrupt Practices Act compliance manual or training regime in place. The only anti-bribery materials given to Promeca were in English only.
Orthofix did not have an adequate internal auditing system in place and failed to conform with GAAP.

The complaint can be found here.

In the Matter of Altamont Global Partners

Funds managed by Altamont made loans to Altamont in violation of NFA Compliance Rule 2-45 which prohibits loans by commodity pools to its CPO/affiliated persons or entities.
Loan proceeds were used to pay operating expenses or paid directly to employees of Altamont.
Altamont falsified quarterly statements by hiding losses and inflating funds’ net asset value to make it appear as if trading had been successful.

The complaint can be found here.

Takeaways for Managers

Above all else, keep accurate and honest records. Managers should be sure to follow GAAP when creating financial records for their funds, and never falsify accounting documents. As Orthofix demonstrates, it is also crucially important that managers employ appropriate internal mechanisms to avoid fraudulent or harmful practices from developing. Rule 204-2 under the Advisers Act requires registered advisers to maintain true, complete, and current books and records relating to its investment advisory business. Generally, there are three categories of records to be maintained: (i) business records of the advisor, (ii) records of the adviser that relate to the adviser’s clients and the adviser’s advisory activities, and (iii) records relating to the adviser’s compliance program.

Conclusion

While Gold Mining Corp. and Orthofix involve the relationships between businesses and their subsidiaries, they offer good examples of the need to establish and maintain policies designed to prevent inaccurate recordkeeping. Altamont Global Partners represents a warning for fund managers to avoid falsifying their funds’ financial documents to hide losses or inflate net asset value.

****

Cole-Frieman & Mallon LLP provides a full suite of legal and compliance services to investment managers. The firm can be reached through our contact page and Bart Mallon can be reached directly at 415-868-5345.

NFA Notice to CPOs with Assets at PFG

Leave a reply

Managers Required to Provide Information to NFA Immediately

As has been widely reported, futures FCM PFG has filed for bankruptcy and the CFTC has filed an action against the firm.

Below is a reprinted notice to NFA Members who are commodity pool operators. CPOs must inform the NFA about any accounts held at PFG including information on amount of assets held at PFG and most recent pool NAV. CPOs will need to provide this information to the NFA immediately and there is contact information in the notice below if a CPO has specific questions for the NFA.

If you are a CPO, CTA or IB with assets held at PFG, please contact our firm if you have questions with respect to next steps.

****

Notice to Members I-12-13

July 10, 2012

CPO RESPONSE REQUIRED

FOR COMMODITY POOL OPERATORS – A RESPONSE IS REQUIRED FROM CPO MEMBERS WITH ACCOUNTS AT PEREGRINE FINANCIAL GROUP INC.

On July 9, 2012, National Futures Association (NFA) took an emergency enforcement action against Peregrine Financial Group, Inc. (PFG) and Peregrine Asset Management, Inc. (PAM). NFA deemed this action necessary to protect customers because PFG is unable to demonstrate that it can meet its capital requirements and segregated funds requirements, and because NFA has reason to believe that PFG does not have sufficient assets to meet its obligations to its customers. The CFTC has also filed a complaint in the United States District Court for the Northern District of Illinois against PFG and its owner, Russell R. Wasendorf, Sr. alleging that PFG and Wasendorf committed fraud by misappropriating customer funds, violated customer fund segregation laws, and made false statements in financial statements filed with the Commission.

In light of these events, NFA is requiring all CPO Members with pool accounts held at PFG to provide NFA with a notice of the following information:

The name of each pool account held at PFG and its NFA Pool ID number;

The current dollar amount of pool assets held at PFG for each pool account and the corresponding date;
The most recent net asset value for each pool with funds at PFG and the date of the valuation;
Any withdrawal restrictions that the firm has implemented or plans to implement with respect to each pool.
CPO members must provide this information to NFA by sending an email to [email protected] within 48 hours of receiving this notice.

Any questions regarding this request should be directed to:

Tracey Hunt, Senior Manager, at (312) 781-1284 or at [email protected]

Mary McHenry, Senior Manager, at (312) 781-1420 or at [email protected]

You are receiving this message because you are either a Member of National Futures Association (NFA) or you subscribed to the email subscription list on NFA’s Website. To cancel or change your subscription at any time, visit the Email Subscriptions page on our Website at http://www.nfa.futures.org/news/subscribe.asp.

***

Bart Mallon is a partner with Cole-Frieman Mallon & Hunt LLP, an investment management law firm with a focus on managed futures law and regulations. Bart can be reached directly at 415-868-5345.

SEC Focusing on Marketing Misrepresentations

1 Reply

SEC v. Kapur Highlights Increased Focused of Examination

On November 10, 2011, the SEC filed in action in the US District Court for the Southern District of New York against Chetan Kapur (“Kapur”) and Lilaboc, LLC (“Lilaboc” or “t

he firm”). The SEC alleged that Kapur and Lilaboc overstated the performance, longevity, and assets of funds they managed as well as Kapur’s credentials as a manager and the due diligence procedures in place to safeguard investments.

The SEC’s complaint claims that Kapur and the firm made numerous misrepresentations in mailings, emails, postings on hedge fund websites, and marketing materials distributed to prospective investors.

The SEC asserted causes of action under Section 17(a) of the Securities Act (prohibiting fraudulent interstate transactions), Section 10(b) of the Exchange Act and related rules (prohibiting the use of manipulative and deceptive devices); Section 206(4) of the Advisers Act (prohibiting acts, practices or courses of business that are fraudulent, deceptive or manipulative), and for equitable relief.

The SEC’s complaint is available here: SEC v. Kapur.

Takeaways for Managers

The alleged misrepresentations included the following:

Overstating the performances of funds the firm managed, giving investors the false impression that the funds’ track records were consistently positive and minimally volatile;
Statements of the true inception dates of funds, routinely providing information about funds’ performances for years prior to the true creation of said funds;
Statements that certain individuals were involved as part of the
payday loans online

firm’s management team, when in fact they were not affiliated with the firm in any way;
Statements that Kapur had an MBA from Wharton and had 15 years of experience in investing. In fact, Kapur only had an undergraduate degree from Wharton, and his claim of 15 years of experience in investing would have meant he began his career when he was 14 years old; and
Statements that the firm conducted high levels of due diligence, when in actuality the firm repeatedly failed to conduct due diligence resulting in investments in Ponzi schemes and other fraudulent offerings.

This action highlights several points for managers:

The SEC takes a broad approach to enforcing anti-fraud provisions of the securities laws, and managers should pay careful attention to the accuracy of the information provided in their marketing materials;
Do not lie in materials provided to prospective investors, including exaggerations about management qualifications, experience and funds’ performances;
Be sure to adhere to the procedures and policies you claim to follow; and
Maintain files of backup materials to document every factual statement made in your marketing materials.

Conclusion

Though Kapur encompasses a deeply troubling pattern of fraud and misrepresentation, the message from the SEC to managers is clear: managers should take care that the material they provide to prospective clients is accurate and avoid making claims that do not truly reflect the nature of their operations. We recommend that your attorney, in-house counsel or compliance consultant review all marketing materials prior to distributing them, and that you retain these materials and backup information in your files.

****

Bart Mallon is a partner with Cole-Frieman Mallon & Hunt LLP, an investment management law firm. Bart can be reached directly at 415-868-5345.

Hedge Fund Events July 2012

Leave a reply

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

****

July 9
Sponsor: Norton Rose
Event: The Impact of Regulatory Changes in the US
Location: Webinar

July 10
Sponsor: B2B
Event: How Traders Have Been Affected by the Volcker Rule and Other Hindrances
Location: Webinar

July 10
Sponsor: New York Hedge Fund Roundtable
Event: Update on Green Investing
Location: New York, NY

July 11
Sponsor: 100 Women in Hedge Funds
Event: 11th Annual Risk Management Panel
Location: New York, NY

July 12
Sponsor: The Southeastern Hedge Fund Association
Event: The 11th Annual SEHFA Barbeque
Location: Atlanta, GA

July 14
Sponsor: National Association of Investors Corporation
Event: Twin Cities Investor Education Day
Location: Bloomington, MN

July 18
Sponsor: CNBC and Insitutional Investor
Event: Delivering Alpha
Location: New York, NY

July 18
Sponsor: Infovest 21
Event: Morning Liquid Hedge Fund Series: Tax Efficiency, Fees, Structure – What Investors Need To Know About 40 Act Mutual Funds
Location: New York, NY

July 19
Sponsor: Hedge Funds Care
Event: 2nd Annual Midwest Committee of Hope Bags Tournament
Location: Chicago, IL

July 19-20
Sponsor: Financial Rsearch Associates
Event: Private Investment Fund Accounting and Auditing Forum
Location: New York, NY

July 21
Sponsor: Jerry Weintraug and John Botti
Event: 7th Annual West Coast Bike Ride
Location: Sonoma, CA

July 22-25
Sponsor: BZ Events
Event: The SharePoint Technology Conference
Location: Boston, MA

July 23
Sponsor: CFA Institute
Event: Improving the Invesment Decision-making Process
Location: Chicago, IL

July 23-25
Sponsor: Opal Financial Group
Event: Family Office & Private Wealth Management Forum
Location: Newport, RI

July 23-25
Sponsor: Opal Fiancial Group
Event: Public Funds Summit East
Location: Newport, RI

July 25
Sponsor: Hedge Fund Association
Event: HFA Symposium: Evolution of the Hedge Fund Industry in a Newly Regulated World
Location: New York, NY

July 25-27
Sponsor: Infocast
Event: JOBS Act Investment Summit
Location: Santa Clara, CA

July 28
Sponsor: New York Young Professionals Committee
Event: “Behind the Hedges” Cocktail Party
Location: Southhampton, NY

July 30-31
Sponsor: Financial Adviser and Private Wealth
Event: Innovative Alternative Strategies http://www.fa-mag.com/alts
Location: Denver, CA

July 30-31
Sponsor: Financial Research Associates
Event: Hedge Fund Investment & Operations BOOT CAMP
Location: New York, NY

July 31
Sponsor: Advantage
Event: Are you Investment Worthy?
Location: Jacksonville, FL

****

Cole-Frieman Mallon & Hunt 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.

NFA Provides Guidance on Rule 4.13(a)(4) Recission

Leave a reply

Managers Allowed to Pre-File New Exemption

In earlier posts, we briefly discusssed the Rule 4.13(a)(4) exemption recission (we also discussed the topic as part of an article on the managed futures industry post-MF Global bankruptcy). In essence the old 4.13(a)(4) exemption allowed certain fund managers to escape CPO and CTA registration if all of the investors in a fund were qualified eligible persons. While managers who were previously relying on the exemption can maintain their exempt status until December 31 of this year, new managers may not rely on the exemption. Additionally, previously exempt managers are going to need to register or find another CPO exemption that may be applicable.

Many managers are going to be able to seek an exemption under Rule 4.7, the so-called “lite-touch” regulatory regime. In order to facilitate a transition from a 4.13(a)(4) exemption to the 4.7 exemption, the NFA has modified its systems to allow managers to make the transition automatic as of December 31, 2012 through a pre-filing. Managers who pre-file, will not be subject to the regulatory requirements for the new exemption in 2012. Managers who withdraw the 4.13(a)(4) exemption without pre-filing may become subject to certain CFTC requirements. For more information, we have reprinted the NFA notice in full below.

If you have questions with respect to the exemption, please contact us.

****

Notice to Members I-12-09

June 22, 2012

Guidance to NFA Member CPOs and CTAs that Operate or Advise Pools Pursuant to an Exemption under CFTC Regulation 4.13(a)(4)

On February 24, 2012, the CFTC issued final rules amending CFTC Part 4 Regulations to rescind the exemption from registration available to CPOs offering certain qualifying pools under CFTC Regulation 4.13(a)(4). Although Member CPOs that currently operate a pool(s) pursuant to a 4.13(a)(4) exemption may continue to operate the pool pursuant to that exemption until December 31, 2012, those CPOs must determine whether the 4.13(a)(4) exempt pool qualifies for an exemption from registration under CFTC Regulation 4.13(a)(3) or whether the CPO will become subject to CFTC Part 4 reporting and disclosure requirements for that pool subsequent to December 31, 2012. Similarly, any CTA that advises a 4.13(a)(4) exempt pool pursuant to an exemption under CFTC Regulation 4.14(a)(8)(D) may only continue to advise that pool after December 31 if the CTA continues to be eligible for that exemption because the CPO has filed a 4.13(a)(3) exemption for that pool. Otherwise, the CTA must comply with the applicable Part 4 requirements with respect to that pool.

The final rules also amend a number of CFTC Regulations to require CPOs and CTAs that claim an exemption under CFTC Regulation 4.5, 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), 4.13(a)(5) and 4.14(a)(8) to annually reaffirm the applicable notice of exemption. CPOs and CTAs will have 60 days after the calendar year-end to reaffirm the notice of exemption through NFA’s Electronic Exemption System. The first notice reaffirming these exemptions is due for the calendar year ending December 31, 2012 and annually thereafter. Any CPO or CTA that fails to file a notice reaffirming the exemption will be deemed to have requested a withdrawal of the exemption. If the exemption is deemed withdrawn, the CPO or CTA would be required to comply with the applicable Part 4 Requirements with respect to that pool.

Member CPOs and CTAs are encouraged to review the status of their exempt pools in order to ensure that they are in compliance with the new regulatory requirements.

Other Available Exemptive Relief

A CPO that currently operates a pool(s) pursuant to 4.13(a)(4) that will not qualify for a exemption under 4.13(a)(3) after December 31, 2012 may be able to avail itself of relief from certain regulatory requirements for qualifying pools by filing an exemption under Regulations 4.7, 4.12 or CFTC Advisory 18-96. Similarly, a CTA may be eligible under Regulation 4.7 for certain relief with respect to accounts of qualified eligible persons (QEPs). To determine whether you qualify for any of these exemptions, please consult CFTC Regulations – Part 4. All exemptions other than an exemption under CFTC Advisory 18-96 must be filed through NFA Electronic Exemption System at http://www.nfa.futures.org/NFA-electronic-filings/exemptions.HTML. An exemption under CFTC Advisory 18-96 must be filed in hard copy form with NFA’s Compliance Department.

To assist CPOs in the process of withdrawing a 4.13(a)(4) exemption and claiming another available exemption, NFA will modify the Electronic Exemption System to give CPOs that currently hold a 4.13(a)(4) exemption the ability to pre-file for an available exemption that would become effective on January 1, 2013. A CPO that elects to use the pre-filing option will not become subject to the additional reporting and disclosure requirements related to the newly claimed exemption until 2013. Please be aware that a CPO that elects not to use the pre-filing option and withdraws its 4.13(a)(4) exemption and files for another available exemption (other than a 4.13(a)(3) exemption) prior to December 31, 2012 will immediately become subject to the CFTC and NFA regulatory requirements related to the new exemption, including the requirement to file a certified annual report for 2012.

Withdrawing the 4.13(a)(4) Exemption

CPOs may withdraw an exemption by accessing NFA’s Electronic Exemption System at http://www.nfa.futures.org/NFA-electronic-filings/exemptions.HTML. Any CPO that elects to withdraw a 4.13(a)(4) exemption prior to December 31, 2012 and does not file a 4.13(a)(3) exemption or other available exemption, will become subject to all reporting and disclosure requirements under CFTC regulations and NFA rules for that pool. CPOs that are not eligible to claim another exemption for a current 4.13(a)(4) pool are not required to affirmatively withdraw that exemption since NFA will automatically terminate 4.13(a)(4) exemptions for all pools on December 31, 2012.

Cessation of Pool

CPOs that filed a 4.13(a)(3) or 4.13(a)(4) exemption for a pool that never commenced operations or that has subsequently ceased operating should update NFA’s records with the applicable information. The CPO must first withdraw the exemption by accessing NFA’s Electronic Exemption System at http://www.nfa.futures.org/NFA-electronic-filings/exemptions.HTML. At the time you withdraw the exemption, you will be directed to the Annual Questionnaire to delete or cease the pool.

Questions concerning these changes should be directed to Mary McHenry, Senior Manager, Compliance ([email protected] or 312-781-1420) or Tracey Hunt, Senior Manager, Compliance ([email protected] or 312-781-1284).

****

Bart Mallon is a partner with Cole-Frieman Mallon & Hunt LLP, an investment management law firm with a practice area focused on managed futures laws and regulations. Bart can be reached directly at 415-868-5345.

Hedge Fund Schedule K-1 Update

Leave a reply

New IRS Procedure Allows Partnerships to Electronically Deliver Schedule K-1s to Investors

Effective February 12, 2012, a new IRS Revenue Procedure allows partnerships to exclusively deliver electronic Schedule K-1 Statements (“K-1s”) instead of paper statements. In order to send electronic K-1s, a partnership (such as a hedge fund) must follow certain steps and obtain each partner’s consent. Many fund managers either have or will want to go through the process of switching to electronic K-1s. This post will provide more information on how to complete the process and managers should also feel free to contact us if there are additional questions.

Switching from Paper to Electronic K-1s

Provided that the electronic K-1 is an exact copy of the official Schedule K-1 and the partnership follows the procedures in the revenue procedure above, a partnership does not need to gain the approval of the IRS before switching to electronic K-1s. However, a partnership should be careful to comply with the requirements of the revenue procedure because a failure to do so could be deemed a failure to furnish a Schedule K-1 to partners possibly triggering penalties under Revenue Code Section 6722.

In general, a partnership must (1) provide certain disclosures, (2) obtain each partner’s consent in a manner that demonstrates that such partner has access to the technology required to access the electronic K-1, and (3) follow certain policies and procedures detailed in the revenue procedure.

1. Required Disclosures

When obtaining a partner’s consent the partnership must disclose the following:

i) That a partner will continue to receive paper K-1s unless the partner consents to receive electronic K-1s;

ii) If consent is effective until withdrawn or for a shorter duration;

iii) The procedure for obtaining a paper copy after consent;

iv) The procedure to withdraw consent, and when withdrawal of consent becomes effective;

v) Under what conditions the partnership will cease providing electronic K-1s to a partner;

vi) How a partner can update his contact information; and

vii) The hardware and software required to access electronic K-1s.

2. Obtaining Effective Consent

In addition to the disclosures above, a partnership must obtain consent from each partner

in a manner that demonstrates that the consenting partner has access to the technology that will be used to deliver the electronic K-1s. The simplest way to do this is to create a consent form that uses the same technology through which electronic K-1s will be delivered. For example, if a partnership intends to send electronic K-1s via secure email it should it send its consent form via secure email and require that each partner signs and sends back the consent form via secure email. Section 4 of the revenue procedure contains additional examples of how a partnership may obtain effective consent.

3. Required Policies and Procedures

In order for electronic delivery of K-1s to be permitted a partnership must institute policies and procedures so that

i) Electronic K-1s are identical copies of official K-1s;

ii) If electronic K-1s will be delivered by publication on the partnership’s website each partner must be given timely notice of the posting;

iii) If any email notice is returned as undeliverable, the partnership must, within 30 days of the return, email the notice to a correct email address or mail a paper copy of the notice;

iv) If electronic K-1s will be delivered by publication on the partnership’s website, a K-1 must be available on the website for the later of 12 months after the taxable year to which K-1 refers or 6 months after K-1 is posted; and

v) A partnership must deliver paper K-1s to any partner that withdraws consent to receive electronic K-1s.

****

Bart Mallon is a partner with Cole-Frieman Mallon & Hunt LLP, an investment management law firm. Bart can be reached directly at 415-868-5345.

FINRA Announces PFRD System for Form PF

Leave a reply

Form PF Filing System Active

As we have discussed in previous posts, many hedge fund managers are going to be required to complete Form PF on either a quarterly or annual basis. The filing will be made through a new filing system administered by FINRA called the PFRD (Private Fund Reporting Depository). Many funds will have outside groups who will be accessing the system on their behalf. Smaller funds may be able to complete the form themselves.

If you have questions on the form or accessing the PFRD, please contact us.

The PFRD announcement from FINRA is reprinted below.

****

To: Super Account Administrators of Investment Advisers

From: FINRA Entitlement Group

Date: June 4, 2012

Re: New Electronic Private Fund Reporting Depository (PFRD) System Entitlement

The new electronic Private Fund Reporting Depository (PFRD) System facilitates investment adviser reporting of private fund information via Form PF. Beginning today, if you are an investment adviser that is required to report private fund information, you have the ability to entitle yourself as a user to this new application; update existing accounts; and/or create new accounts with this new application. Your current user ID and password remain valid. To determine if you are required to file Form PF, refer to the criteria below.

Complete and file Form PF if:

• You are registered or required to register with the SEC as an investment adviser, or you are registered or required to register with the Commodity Futures Trading Commission (CFTC) as a commodity pool operator or commodity trading advisor and you are also registered or required to register with the SEC as an investment adviser; and

• You manage one or more private funds; and

• You and your related persons, collectively, had at least $150 million in private fund assets under management as of the last day of your most recently completed fiscal year.

For more information on the PFRD System, refer to the information on the IARD web page: http://www.iard.com/pfrd/default.asp.

For questions concerning:

• Form PF filing requirements or policy issues, contact the SEC at (202) 551-6999 or [email protected].

• Technical questions regarding the PFRD System, contact the FINRA Gateway Call Center at (240) 386-4848.

• FINRA Entitlement, contact the FINRA Entitlement Group at (240) 386-4185.

****

Bart Mallon is a partner with Cole-Frieman Mallon & Hunt LLP, an investment management law firm. Bart can be reached directly at 415-868-5345.

Hedge Fund JOBS Act Panel Event

Leave a reply

100 Women in Hedge Funds Event in San Francisco

Below is information on the 100 Women’s event in San Francisco next week. The panel event will discuss how the JOBS Act will affect hedge fund managers. The JOBS Act may be the most discussed issue right now in the hedge fund space, especially as managers wait for rule making from the SEC. Such rule making is expected to outline the requirements for managers wishing to publicly advertise their hedge fund products. For more information, please also see our other posts on this topic:

****

Education Session No. 340: The JOBS Act: Putting It to Work for Private Funds

May 22, 2012 at 6 PM

San Francisco CA

On April 5, 2012 President Obama signed the Jumpstart Our Business Startups (JOBS) Act into law. Silicon Valley firms and the National Venture Capital Association lobbied strongly for passage of the Act, arguing that it will ease the regulatory burdens on emerging companies and facilitate capital formation. The Act also eliminates the restrictions on marketing that most private fund managers have in place to ensure a Reg D private placement.

Our panelists will discuss the implications of the Act on venture capital, private equity and hedge fund managers, and their portfolio companies. They will address how the Act facilitates earlier access to capital and easier exits by start-ups and smaller companies, and the broader marketing opportunities the Act will give private fund managers.

Participants

Emily Chang, Moderator, Bloomberg

Susan Mac Cormac, Morrison & Foerster

Carter Mack, JMP Group

Rachel Sheinbein, CMEA Capital

Event Details

Date: May 22, 2012

Time: 5 PM Registration.

We will begin promptly at 6 PM; please arrive early. Since it is disruptive to everyone when latecomers enter the session, those arriving after an education session has begun will only be admitted at the discretion of 100WHF and the host. Please note the start time on this invite and plan to arrive early.

Host: Morrison & Foerster

Location: 425 Market Street, San Francisco, CA 94105 – Directions

RSVP: RSVP Now

If you have any questions about this event, please contact the California, North committee.

This event is NOT FOR ATTRIBUTION.

Admission is free, but there is a $25 charge if you register and do not attend, even if you cancel in advance. No-show proceeds will be donated to DonorsChoose.org, the 2012 beneficiary of 100WHF’s US philanthropic initiatives.

If you have no-show fees in arrears, the system cannot register you for an event. You can view and pay for any outstanding no-show fees online from your Member Profile

Space is limited. No walk-ins will be permitted.

Biographies

Emily Chang, Anchor of “Bloomberg West”, Bloomberg

Emily Chang is the San Francisco-based anchor of “Bloomberg West,” the hour-long weekday technology program airing at 3pm PT/6 pm ET from Bloomberg TV’s studios in San Francisco. Chang reports on global technology, software and Internet companies as well as trends in social media, entertainment and mobile technology. She also regularly speaks to top tech executives, investors and entrepreneurs. Chang’s interviews include Twitter Executive Chairman and co-founder Jack Dorsey, venture capitalist Marc Andreessen, Comcast CEO Brian Roberts, eBay CEO John Donahoe and Research in Motion CEO Jim Balsillie.

Before joining Bloomberg in 2010, Chang served as an international correspondent for CNN in Beijing. There, she reported on a wide range of stories, including China’s economic transformation and its impact on Chinese society, politics and the environment. Chang has also reported for CNN in London, where she covered international news for CNN’s “American Morning” program.

Prior to joining CNN in 2007, Chang served as a reporter at KNSD, NBC’s affiliate in San Diego, California. There, she filed reports for MSNBC and won five regional Emmy Awards for news writing, health and science and consumer business reporting. Earlier in her career, Chang reported in Honolulu, Hawaii; Birmingham, Alabama and trained as a news producer at NBC in New York.

Born and raised in Kailua, Hawaii, Chang graduated magna cum laude from Harvard University.

Susan Mac Cormac, Partner; Co-Chair Business Department, Morrison & Foerster

Susan Mac Cormac is a partner in the Corporate Group of Morrison & Foerster’s San Francisco office. She serves as co-chair of the Firm’s 550 lawyer Business Department, and co-chair of the Cleantech Group. She has extensive experience representing start-up to late-stage private companies primarily in the Cleantech or sustainable space, including Arcadia, ClimateEarth, driptech, ElectraTherm, enXco, OneSun, Revolution Foods, and SourceTrace. She also represents impact investors such as Capricorn/Virgo, Brightpath Capital Partners, Pacific Community Ventures, RSF Social Finance, and OPIC. She provides corporate and finance advice in connection with mergers, acquisitions, asset purchases and sales, reorganizations, joint ventures, and equity and debt financings.

Ms. Mac Cormac was named by California Lawyer Magazine as one of the 2012 California Lawyers of the Year for her effective legislative change in California as co-chair of the Working Group for the Flexible Purpose Corporation. She was recognized by the Daily Journal as one of the Top Female Attorneys in California (May 2011) and as one of the Top 25 Clean Tech Lawyers in California (March 2011). Ms. Mac Cormac was named to The American Lawyer’s “45 Under 45” list of outstanding women lawyers (January 2011) and selected by her peers for Best Lawyers in America 2011. She was also recognized by clients in Legal 500 United States 2009 and 2010 for her expertise working with venture capitalists and emerging companies.

Ms. Mac Cormac serves as co-chair of the Working Group and has spent 500 pro bono hours over the past three years drafting a new corporate form for California: the Flexible Purpose Corporation. She is on the Board of Directors of the Sustainability Accounting Standards Board (“SASB”) and the Biomimicry Institute.

Carter Mack, President, JMP Group

Carter Mack is a co-founder of JMP Group and serves as its President. He is also a member of the executive committee of JMP Group and serves on its board of directors. From the company’s inception in 1999 through 2010, Carter served as Director of Investment Banking at JMP Securities; and, from 2007 through 2010, he additionally served as Co-President of JMP Securities.

Recently served as one of three investment banking members of the IPO Task Force which provided a series of recommendations on ways to improve the IPO market in a report to the US Treasury Department in October 2011. The IPO Task Force recommendations were incorporated into the JOBS Act which was signed into law in April 2012.

Prior to founding JMP, Carter served as a Managing Director in the financial services investment banking group at Montgomery Securities, now Banc of America Securities, from 1996 to 1999. He previously spent five years in investment banking at Merrill Lynch focused on financial institutions. During his career, Carter has been involved in corporate finance and merger and acquisition transactions totaling more than $40 billion in value.

Carter holds an MBA from the UCLA Anderson School of Management and a BA from the University of California, Berkeley.

Rachel Sheinbein, Partner, CMEA Capital

Rachel Sheinbein is a Partner with the Energy and Materials team at CMEA Capital. She is a board member for Solaria, Danotek Motion, Contour Energy and Arcadia Biosciences and an observer for Reel Solar. Before CMEA, Rachel was a consultant for start-ups in the areas of bio-plastics, solar and water. For 9 years prior, Rachel worked at Intel, in wastewater systems, Environmental Health & Safety, and Supply Chain IT.

Rachel is the President of the board of Expanding Your Horizons Network, a non-profit that encourages girls in math, science, engineering and technology. In addition, Rachel volunteers in various roles for Astia, the California Clean Tech Open and Imagine H2O – a not-for-profit that is turning water problems into entrepreneurial opportunities.

Ms. Sheinbein holds a Chemical Engineering degree with a concentration in Environmental Engineering from the University of Pennsylvania. Rachel was also a sponsored fellow at the Massachusetts Institute of Technology (MIT) where she received an MBA and a Masters in Civil and Environmental Engineering, with a focus on operations and supply chain.

****

Cole-Frieman Mallon & Hunt LLP provides legal services to the investment management industry. Bart Mallon runs the Hedge Fund Law Blog and can be reached directly at 415-868-5345.

SALT Conference 2012

Leave a reply

Hedge Fund Conference Starts Tuesday

Today marks the kick-off to the Las Vegas SALT Conference hosted by Skybridge Capital. The event is perhaps the largest event in the United States for the hedge fund industry and will bring together the following speakers for a number

of discussions and panels:

Political figures – Robert M. Gates, Al Gore, Sarah Palin, Robert Gibbs, Karl Rove
Academics – Nouriel Roubini, Jeremy Sigel
Authors – Jim Collins, Ben Mezrich, Hannah Grove
Media – Kate Kelly, Gary Kaminsky, Maneet Ahuja
Fund Managers

In addition to the planned events, there are many opportunities for those in the industry to meet and network. We were in Las Vegas last year and happened to catch some of the events and you can find our previous thoughts here.

We anticipate that this event will be even better than in past years and look forward to seeing people at the Bellagio.

****

Cole-Frieman Mallon & Hunt is an investment management law firm. Bart Mallon can be reached directly at 415-868-5345.

More on JOBS Act for Hedge Fund Managers

Leave a reply

Below is the transcript of an interview I gave to Markets Reform Wiki. The discussion below is about how the recently enacted JOBS Act will affect the hedge fund industry. There has been an overwhelming amount of attention paid to this bill because it will, in certain ways, fundamentally change the way some managers (especially small and emerging) market their hedge fund going forward. We have also published other pieces about this issue and there will likely be a lot of discussion about hedge fund marketing related to the JOBS Act in the future.

****

Hedge Fund Marketing and the JOBS Act

Five Minutes with Bart Mallon, Cole-Frieman, Mallon & Hunt LLP

On April 5, 2012 President Obama signed into law the Jumpstart Our Business Startups Act (“JOBS Act”). Inserted into the Act were provisions on hedge fund marketing and accredited investor restrictions. John Lothian News Editor-at-Large Doug Ashburn spoke with Bart Mallon of Cole-Frieman, Mallon & Hunt LLP about the JOBS Act provisions, what they entail and how it will affect the hedge fund community.

Q: On April 5, 2012 President Obama signed into law the Jumpstart Our Business Startups Act (“JOBS Act”). Inserted into the Act were provisions on hedge fund marketing and accredited investor restrictions. What exactly do the provisions entail?

A: There is not actually any change in marketing provisions per se. What happened is the JOBS Act repealed earlier provisions in the securities laws which did not allow managers to have general solicitations with respect to their offerings. This essentially meant that managers could not solicit by advertising to the public through these private offerings and so managers really had to be careful when trying to grow the assets of their fund. One of the important things to note with respect to the provisions of the JOBS Act is that they can only market more freely if all of the investors of the fund are accredited investors. If they have non-accredited investors coming into the fund, then they cannot use these more liberal advertising means in order to solicit investors.

Q: Does this affect all types of fund structures?

A: For a 3(c)(1) fund structure, the accredited investor limit does not change. These managers are still limited to 99 individual investors. For 3(c)(7) funds, previously the limit was 499 investors. Now, that can be bumped up to 1999 investors. For 3(c)(7) funds, though, all investors must be qualified purchasers, which is actually a higher threshold than that of accredited investors.

Q: What do these marketing rules have to do with the JOBS Act, and why are they a part of it?

A: You have a couple things going on here. As people have been pointing out for a number of years, most of these securities laws were written in the 1930s, with the last one in 1940. The general nature of the industry has changed over the years; the JOBS Act is a reaction to some of the problems with these laws. Technological advances, and the ability of the internet to be a means of connecting with people in a way to market to potential investors – securities laws just do not address those issues. The JOBS Act was trying to find a way to balance investor protection of the securities laws with the ability for managers to go out and communicate and have a sort of certainty with respect to their activities on the internet.

Q: How will this change the way funds structure communication, such as on their web sites?

A: There is going to be a wide range of ways managers will be allowed to advertise. You will see more information available on their web sites and on hedge fund databases. You are also more likely to see hedge funds marketed in publications such as the Wall Street Journal or New York Times. There has also been talk that big fund complexes may have public advertising in sporting venues and such. I don’t know if it will come to that, but we are definitely going to see more fund managers trying to get out in front of the investing public and getting their name out there more. It will be interesting to see the avenues with which managers will use.

Q: Critics have suggested that this will be an invitation to some of the less scrupulous operators to come out of the woodwork to take advantage of the new rules. Do you see a problem with that?

A: Certainly, this is going to make the job of securities regulators much more difficult. Right now, with the restrictions, you don’t have a lot of managers out there touting performance and those sorts of things. Once you open up the floodgates and everyone starts doing it, it will be a lot harder for the SEC and for the state regulators to keep on top of what all these managers are showing. From a regulatory standpoint, in asking these agencies to enforce these securities laws and protect the investing public amid this deluge of advertising, I think becomes a tough task for the regulators. Savvy marketing people who might not have the best of intentions with respect to customer protections will have an easier time meeting population targets. That is one of the things Congress had to weigh when creating this law – investor protection versus capital formation and spurring the economy.

Q: The SEC has been given a timetable for the creation of a framework for these new rules. What do you expect to see in the SEC rulemaking?

A: I imagine we will see a lot of rulemaking on recordkeeping, and also on being able to back up any statements made in any advertising materials. It is clear that managers are going to need to make sure their investors are accredited investors, so I think there could be more of an onus on managers to do more fact-checking with respect to their investors.

But it really depends on how aggressive the SEC wants to be with respect to overseeing solicitations. The SEC is already an underfunded agency, so if they create more onerous rules for themselves to implement and oversee, they will be taking away from themselves internally. They have their own political balance they need to strike between promulgating rules that they can actually enforce, versus investor protection.

Bart Mallon is a partner and co-founder of Cole-Frieman Mallon & Hunt LLP, a San-Francisco-based law firm specializing in hedge fund and alternative investment legal services. His areas of specialization include setting up offshore hedge funds and separately managed structured accounts, and registration issues. Mallon is also the author of the Hedge Fund Law blog.

****

Cole-Frieman Mallon & Hunt provide legal advice to hedge fund managers with respect to all aspects of their business including marketing under the new JOBS Act provisions. Bart Mallon can be reached directly at 415-868-5345.