February 3, 2017
Private fund advisers are subject to a number of regulatory reporting requirements and other compliance obligations, many of which need to be completed on an annual basis. This memorandum provides a brief overview.
Private fund advisers that are either registered investment advisers ("RIAs") or exempt reporting advisers ("ERAs") under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act"), must comply with a number of regulatory reporting obligations under the Advisers Act. Chief among these are the obligations to update their Form ADV and Form PF filings with the SEC on an annual basis. The following is a brief summary of those filing obligations and the applicable deadlines (assuming a fiscal year end of December 31, 2016):
(a) Form ADV Annual Update (3/31/2017 deadline). Each RIA and ERA has an ongoing obligation to update the information provided in its Form ADV no less frequently than annually. This annual update must be filed within 90 days of the end of the adviser’s fiscal year end. An RIA must update the information provided in both the "check the box" portion of its Form ADV (Part 1A) and in its "disclosure brochure" (Part 2A). An ERA is only required to update the information reported in its abbreviated Part 1A filing. All such updates must be filed with the SEC electronically through IARD. In order to avoid last minute delays, we strongly recommend that each private fund adviser check its IARD account early to ensure that its security access codes are up-to-date and working. We also recommend that each firm check the balance in its IARD account and wire sufficient funds to cover all Federal and state filing fees well in advance of the filing deadline. Each RIA is also required to update the information provided in its "supplemental brochures" (Part 2B) no less frequently than annually. Although an RIA is not required to publicly file its supplemental brochures with the SEC, updated supplemental brochures must be kept on file at the RIA’s offices.
(b) Disclosure Brochure Delivery (5/01/2017 deadline). An RIA is also required to deliver an updated version of its Part 2A disclosure brochure to all clients within 120 days of the end of its fiscal year. An RIA may comply with this requirement either by mailing a complete copy of its updated brochure to its clients or by sending a letter providing a summary of any material changes that have been made to the brochure since its last annual update and offering to provide a complete copy of the updated brochure upon request free of charge.
(c) Forms PF and CPO-PQR (5/01/2017 deadline). An RIA (but not an ERA) whose assets under management attributable to private funds exceeds $150 million is required to provide a report on Form PF to the SEC regarding its private funds’ investment activities. For most registered private fund advisers, the Form PF is required to be filed once a year within 120 days of the end of the adviser’s fiscal year. However, a private fund adviser whose assets under management exceed certain thresholds may be required to file more frequently and/or on shorter deadlines. In addition, the information that such a large private fund adviser must provide to the SEC is significantly more extensive. An RIA that is also registered under the Commodity Exchange Act ("CEA") as a Commodity Pool Operator ("CPO") or Commodity Trading Adviser ("CTA") should also consider its reporting obligations under Form CPO-PQR, a Commodity Futures Trading Commission ("CFTC") form that serves the same purpose as, and requires the reporting of similar types of information to, Form PF. In theory, a dual registrant may comply with its reporting obligations under both the Advisers Act and the CEA by filing a single Form PF. However, the CFTC still requires certain information to be provided in a Form CPO-PQR filing in order to take advantage of this feature.
Rule 206(4)-7 under the Advisers Act (the "Compliance Program Rule") requires an RIA (but not an ERA) to review no less frequently than annually the adequacy of its compliance policies and procedures and the effectiveness of their implementation. Although the Compliance Program Rule does not require that these reviews be in writing, the SEC’s Staff has a clear expectation that an RIA will document its review. SEC examiners routinely request copies of an RIA’s annual compliance program review reports as part of the examination process.
Producing an annual compliance program review report need not be overly burdensome. Although an RIA may consider engaging a third party to conduct a comprehensive audit of the firm’s compliance program from time to time, under normal circumstances an RIA can take a more risk-based approach to the process. For example, an RIA might build a review around the following three themes where potential compliance risks may be most acute:
Compliance policies and procedures that may be affected by changes in the RIA’s business or business practices since the last review was conducted;
Any areas where SEC examiners have identified deficiencies or where the firm has experienced compliance challenges; and
Any changes in applicable law, regulation, interpretive guidance or regulatory priorities.
In addition, a CCO should include in the report any incremental improvements that have been made to the firm’s compliance program throughout the year, not just as part of a formal annual review process.
The following is a brief summary of the more notable regulatory developments for 2016 that private fund advisers may want to take into consideration when conducting their annual compliance program reviews.
(a) Fees and Expenses. The SEC continues to send clear signals that it places a high priority on industry practices concerning the collection of non-investment advisory fees from portfolio companies and on the allocation of the adviser’s expenses to funds. This past year, the SEC’s Enforcement Division settled several well-publicized enforcement actions against private equity firms in which violations of fiduciary duties were found with respect to the collection of non-advisory fees and/or the allocation of expenses. Examples of the types of practices that could trigger SEC scrutiny, (particularly if not the subject of clear prior disclosure and/or a contractual basis in the applicable fund governing documents) include:
re-characterizations of non-investment advisory fee revenue that appear to be intended to avoid triggering management fee offsets;
charging accelerated monitoring or similar fees to portfolio companies;
allocating expenses related to the adviser’s overhead and/or back-office services to its funds;
allocating broken deal expenses to funds without allocating a portion of those expenses to other potential co-investors (especially affiliated co-investors); and
negotiating discounts on service provider fees for work performed on behalf of the adviser without also making the benefit of those discounts available to the adviser’s funds.
We continue to encourage private fund advisers to review their financial controls with respect to fee collection, management fee offsets and expense allocations to ensure that their practices are consistent with their funds’ governing documents and in line with SEC expectations. We also encourage firms to review their disclosure regarding fee collection and expense allocation practices to make sure that it is up-to-date and comprehensive.
(b) Unregistered Broker Activities. This past year, the SEC settled a significant enforcement action against a private fund adviser for, among other things, engaging in unregistered securities broker activities in violation of the Securities Exchange Act of 1934 (the "Exchange Act"). This enforcement action is notable in several respects. First, although the SEC found that the private fund adviser had engaged in multiple serious violations of the Advisers Act, the SEC chose to emphasize only its finding that the adviser had acted as an unregistered broker in its press release announcing the enforcement action. More importantly, neither the press release nor the administrative order itself provide any meaningful detail as to precisely what activities the adviser had engaged in that required registration as a broker under the Exchange Act. The administrative order acknowledges that the governing documents for the adviser’s funds expressly permitted the adviser to charge transaction or brokerage fees and that this practice had been fully disclosed to the investors in the funds. Beyond that, however, the administrative order states only that the adviser received roughly $1.9 million in "transaction-based compensation" in connection with "soliciting deals, identifying buyers or sellers, negotiating and structuring transactions, arranging financing and executing the transactions." The SEC appears to have focused on the manner in which the adviser was being compensated and concluded that the receipt of "transaction based fees" for these services without being registered as a broker violated the Exchange Act. In light of the uncertainty, we recommend that private fund advisers reexamine their practices with respect to the receipt of any compensation that might be characterized as transaction fees.
(c) Supervisory Practices. In September of 2016, the SEC’s Office of Compliance Investigations and Examinations ("OCIE") issued a Risk Alert announcing a new initiative focusing on the supervisory practices of RIAs. In addition, the SEC also settled several enforcement actions against private fund advisers in 2016 in which a failure to properly supervise was among the violations found by the SEC. Although OCIE’s Risk Alert focuses primarily on the need to adopt enhanced supervisory and oversight procedures for employees with a history of disciplinary events, private fund advisers may want to consider whether any enhancements to their supervisory structure and practices are advisable in light of this initiative.
(d) Cybersecurity. The SEC continues to make cybersecurity a high priority for the entire financial services industry. In the past two years, OCIE has published three "Risk Alerts" relating to cybersecurity and identified cybersecurity as one of its examination priorities in 2015, 2016 and 2017. In light of this regulatory focus, we recommend that each private fund adviser review its information security policies and practices thoroughly and implement enhancements to address any identified gaps promptly.
(e) Other Conflicts. Finally, private fund advisers should remain vigilant for any other practices or circumstances that could present actual or potential conflicts of interest. In announcing its 2017 examination priorities, OCIE states that its examinations of private fund advisers would continue to focus on "conflicts of interest and disclosure of conflicts of interest as well as actions that appear to benefit the adviser at the expense of investors." Several recent enforcement actions also serve to emphasize the SEC’s view that the failure to properly address and disclose potential conflicts of interest is a breach of an investment adviser’s fiduciary duties under the Advisers Act, even in the absence of clear harm to investors.
The SEC adopted a new rule for RIAs in 2016 that amends Form ADV in a number of significant ways. These include formalization of the SEC’s practice of permitting so-called umbrella registration of multiple private fund advisers operating as a single firm and enhancement of reporting requirements for advisers of separately managed accounts. In addition, the SEC enhanced its record-keeping requirements with respect to performance advertising. The compliance date for these new rules is not until October 1, 2017. Nevertheless, each RIA should consider reviewing its record-keeping procedures now in order to make sure it will be able to capture the additional data that it will need to comply with these new reporting and recordkeeping requirements when they go into effect.
The SEC also proposed a new rule in 2016 that would require RIAs to adopt written business continuity/disaster recovery plans ("BC/DR Plans") and written succession plans. This rule has not yet been adopted, and its fate is uncertain in light of the many changes in personnel that are currently taking place at the SEC. Nevertheless, OCIE already expects investment advisers to maintain written BC/DR Plans in accordance with its interpretation of an adviser’s fiduciary obligations under the Advisers Act, and it would not be surprising if SEC examiners were to begin asking advisers to produce copies of their written succession plans even if the proposed rule is not adopted.
Each private fund adviser should (and in many cases is required to) perform certain annual maintenance tasks with respect to its compliance program. The following is a list of mandatory and recommended tasks that should be completed:
(a) Code of Ethics Acknowledgements. Each RIA is required by Rule 204A-1 under the Advisers Act (the "Code of Ethics Rule") to obtain a written acknowledgement from each of its "access persons" that such person has received a copy of the firm’s Code of Ethics and any amendments thereto. As a matter of best practice, many RIAs request such acknowledgements on an annual basis. In addition, each access person must provide an annual "securities holdings report" at least once every 12 months and quarterly "securities transactions reports" within 30 days of the end of each calendar quarter. We recommend that each RIA review its records to ensure that each of its access persons has complied with these acknowledgement and personal securities reporting requirements, as the failure to maintain such documentation is a frequent deficiency identified by the SEC’s examiners.
In addition, the SEC’s Division of Investment Management issued a Guidance Update in June of 2015 in which the Staff cautioned RIAs against interpreting the exemption for managed accounts from the pre-clearance and reporting requirements of the Code of Ethics Rule too broadly. According to the Staff, the delegation of investment discretion to a third party trustee or investment adviser, by itself, may not be sufficient to demonstrate that an access person is not exercising "direct or indirect influence or control" over the investment account. Among other things, the Staff suggested that RIAs adopt enhanced annual certification requirements for managed accounts designed to ensure that an access person is not in fact exercising direct or indirect influence or control over any investment portfolios for which an access person is claiming the managed account exemption. RIAs may wish to review their practices with respect to managed account exemption in light of this interpretive guidance.
(b) Custody Rule Audits. Compliance with Rule 206(4)-2 under the Advisers Act (the "Custody Rule") generally requires a private fund adviser to prepare annual audited financial statements in accordance with US GAAP for each of its private funds and to deliver such financial statements to the fund’s investors within 120 days of the fund’s fiscal year end (180 days in the case of a fund-of-funds). The SEC’s Staff issued interpretive guidance in 2014 providing its views on the circumstances in which the annual audit requirement under the Custody Rule applies to special purpose vehicles and escrow arrangements. We encourage each private fund adviser to review its fund structures to ensure that every fund and special purpose vehicle that is subject to an annual audit requirement under the Custody Rule is being audited and that such audits are on schedule to be delivered to investors on a timely basis. An RIA that is relying on the alternative "surprise audit" requirements to comply with the Custody Rule for any of its funds or separately managed accounts should engage its auditing firm early in the calendar year to conduct the required surprise audits.
(c) Disclosure Documents/ Side Letter Certifications. In addition to the updates to an RIA’s disclosure and supplemental brochures on Form ADV Part 2A and 2B discussed above, private fund advisers whose funds are continuously raising new capital (e.g., hedge funds) should review the offering documents for their funds to ensure that the disclosure in these documents is up-to-date. A private fund adviser should also check to see that it has complied with all reporting, certification or other obligations it may have under its side letters with investors.
(d) Privacy Notice. An investment adviser whose business is subject to the requirements of Regulation S-P, because it maintains records containing "nonpublic personal information" with respect to "consumers," is required to send privacy notices to its "customers" on an annual basis. As a matter of best practice, most private fund advisers simply send privacy notices to all of their clients and investors, often at the same time they distribute the annual updates to their disclosure brochures on Form ADV (see above). We recommend that each adviser review its privacy notice for any updates to reflect changes in its business practices and for compliance with the requirements of the safe harbor available under Regulation S-P.
(f) Political Contributions. For a firm whose current or potential investor base includes state or local government entities (e.g., state or municipal employee retirement plans or public university endowments), we recommend that the political contributions of any of the firm’s "covered associates" be reviewed for any potential compliance issues under Advisers Act Rule 206(4)-5 (the "pay-to-play" rule).
Depending on the nature and scope of a private fund adviser’s business, numerous other regulatory reporting requirements and other compliance obligations may apply. For example:
(a) Rule 506(d) Bad Actor Questionnaires. For a private fund adviser whose funds are either continuously raising capital (e.g., hedge funds), or where the firm anticipates raising capital in the next twelve months, we recommend that the firm ensure that it has up-to-date "Bad Actor Questionnaires" under Regulation D Rule 506(d) on file for each of its directors, executive officers and any other personnel that are or may be involved in such capital raising efforts. Firms that are or are contemplating engaging in general solicitations under Rule 506(c) of Regulation D should also review their subscription procedures to ensure that they are in compliance with the enhanced accredited investor verification standards required under that Rule.
(b) ERISA. Funds that are not intended to constitute ERISA "plan assets" (e.g., because the fund is a "venture capital operating company" or because "benefit plan investors" own less than 25% of each class of equity of the fund) are typically required to certify non-plan asset status to their ERISA investors annually. Thus, a private fund adviser should confirm that its funds have continued to qualify for a plan asset exception and prepare the required certifications. In addition, investment advisers to funds that are ERISA plan assets sometimes agree to prepare an annual Form 5500 for the fund as a "direct filing entity." This approach allows an underlying ERISA plan investor to rely on this Form 5500 with respect to its investment in the fund and have more limited auditing procedures for its own Form 5500. If this approach is used, Form 5500 is due 9-1/2 months after year-end (i.e., October 15 for calendar year filers). Alternatively, if the fund does not itself file a Form 5500, it will need to provide ERISA investors the information they need to complete their own Form 5500s.
(c) CFTC Considerations. A private fund adviser that is registered as either a CPO or a CTA, or which relies on certain exemptions from registration as a CPO or CTA, is subject to certain annual updating and/or reaffirmation filing requirements under the CEA and the rules adopted by the CFTC thereunder.
Exempt Advisers. Many advisers and general partners of private funds that trade in a de-minimis amount of commodity interests (i.e., futures, options on futures, options on commodities, retail forex transaction, swaps) are not required to register under the CEA as a CPO, but need to qualify for, and rely on, an exemption from CPO registration. CFTC Regulation 4.13(a)(3) provides an exemption for advisers and general partners of private funds that engage in a "de minimis" amount of commodity interests (the "De Minimis Exemption") pursuant to a test found in that regulation. Other exemptions from registration as a CPO or a CTA may be available to advisers or general partners of private funds. An adviser or general partner must claim an exemption from CPO registration with respect to each fund that invests in commodity interests by filing an initial exemption through the National Futures Association ("NFA") website and must affirm its exemption filing within 60 days after the end of each calendar year or else the exemption will be deemed to be withdrawn.
Registered CPOs and CTAs. If a private fund does not qualify for the De Minimis Exemption or another exemption, the adviser or general partner of that private fund may be required to register with the CFTC as a CPO or a CTA, resulting in annual fees, disclosure, recordkeeping and reporting requirements. Notably, a registered CPO must file an annual report with respect to each relevant commodity pool that it operates and update disclosures to investors (unless a limited exemption under CFTC Regulation 4.7 applies). A registered CPO should also consider reporting obligations under Form CPO-PQR, which would need to be filed with the NFA within 60 days of the end of each calendar quarter (depending on AUM). Similarly, registered CTAs must consider reporting obligations under Form CTA-PR, which must be filed with the NFA within 45 days after the end of each calendar quarter. If a manager or general partner is dually-registered as both a CPO and a CTA, it must complete Form CTA-PR and Form CPO-PR with respect to the relevant private funds.
Other Considerations – Clearing, Trading and Uncleared Margin. Regardless of whether an adviser or general partner claims an exemption from CPO registration with respect to a private fund, the simple fact that the private fund engages in commodity interests makes the private fund a "commodity pool" and the adviser and general partner CPOs (even if they are exempt from registration). The designation as a commodity pool has some practical impacts on private funds as commodity pools are considered "financial entities" under Section 2(h)(7)(C)(i) of the CEA and are therefore subject to mandatory clearing, trade execution and margin requirements with respect to their swaps activities. Notably, rules with respect to variation margin requirements for uncleared swaps come into force beginning on March 1, 2017, after which date all such uncleared swaps of commodity pools will be subject to variation margin requirements.
(d) Exchange Act Reporting Obligations. Private fund advisers that invest in "NMS securities" (i.e., exchange-listed securities and standardized options) are reminded that such holdings may trigger various reporting obligations under the Exchange Act. For example:
(e) Regulation D and Blue Sky Renewal Filings. A private fund that engages in a private offering lasting more than one year may be subject to annual renewal filing requirements under Regulation D and/or State blue sky laws.
(f) State Pay-to-Play and Lobbyist Registration Laws. A private fund adviser that either has or is soliciting state or local government entities for business may be subject to registration and reporting obligations under applicable lobbyist registration or similar state or municipal statutes in the jurisdictions where the adviser is engaged in such activities.
(g) Cross-Border Transaction Reporting Requirements. A private fund adviser that engages in cross-border transactions or which has non-US investors in its funds may be subject to various reporting requirements under the Department of Treasury’s International Capital ("TIC") System or the Bureau of Economic Analysis’ ("BEA") direct investment survey program. In general, investments that take the form of investments in portfolio securities are subject to TIC reporting requirements, while investments that take the form of direct investments in operating companies are subject to the BEA’s reporting requirements.
BEA. A direct investment is generally defined by the BEA as an investment that involves a greater than 10% voting interest in an operating company. For purposes of applying this definition, general partners are the only entities considered by have a voting interest in a limited partnership. Limited partner interests are not considered voting securities. The BEA’s reporting requirements apply to any direct investment that exceeds $3 million in size (whether by a US investor overseas or by a non-US investor in the US), even if the BEA has not provided notice to the applicable investor that a reporting obligation applies. Which BEA Form applies, and the extent of the reporting person’s reporting requirements, depends on the size and nature of the direct investment.
TIC. In general, any cross-border investment (whether by an investor in a fund or by a fund in a portfolio security) that does not meet the BEA’s definition of a direct investment is reportable under TIC. Again, the form to be used and the frequency and scope of the reporting obligation depends on the size and nature of the investment. In general, however, unless an investor receives written notice from the Federal Reserve Bank of New York to the contrary, an investor is only required to participate in the TIC’s "benchmark surveys", which are conducted once every five years. In addition, the reporting requirement generally falls on the first (or last) US financial institution in the chain of ownership at the US border, which means that in many cases for private fund advisers, the actual reporting obligations applies to the fund’s custodian bank or prime broker, and not on the private fund adviser itself.
(h) European Regulatory Reporting Requirements. Private fund advisers that are either registered as alternative investment fund managers ("AIFMs") or authorized to manage or market alternative investment funds ("AIFs") in the European Economic Area ("EEA") are required to regularly report information (referred to as transparency information) to the relevant regulator in each EEA jurisdiction in which they are so registered or authorized ("Annex IV Reports"). The process of registering to market an AIF is not consistent across jurisdictions. Registration of some type (which can range from mere notice to a formal filing-review-approval process lasting many months) is generally necessary before any marketing of the AIF may take place.
Once registered, the AIFM must begin making Annex IV Reports in each relevant jurisdiction. The transparency information required by the Annex IV Reports concerns the AIFM and the AIFs it is managing or marketing in the EEA. The AIFM must provide extensive details about the principal markets and instruments in which it trades on behalf of the AIFs it manages or markets in the EEA, as well as a thoughtful discussion of various risk profiles. Preparing Annex IV Reports, therefore, can be a challenging exercise. Further, while Annex IV Reports are conceptually analogous across jurisdictions, the precise reporting requirements imposed by each regulator differ.
The reporting frequency will depend on the type and amount of assets under management of the AIFM, as well as the extent of leverage involved, but will be yearly, half-yearly, or quarterly. The reports must be filed within one month of the end of the annual (December 31st), half yearly (June 30th and December 31st) or quarterly (March 31st , June 30th, September 30th and December 31st) reporting periods, as applicable. Furthermore, AIFMD requires the AIF to prepare annual reports for its European investors, covering a range of specified information.
We generally recommend that firms assess reporting requirements on an on-going basis in accordance with any changes to assets under management, and in consultation with reliable local counsel.
As well as requiring the submission of Annex IV reports, AIFMD also imposes other requirements on AIFMs for information to be given to investors and regulators on an on-going basis (including in relation to the acquisition of control of EU companies by the AIF). Consequently, we have seen an increase in the number of firms choosing to adopt a "rent-an-AIFM" approach, effectively outsourcing the compliance function. This removes the need to continually monitor shifts in local regulations, but not the need to do the internal collection and analysis of investment data required to populate the filings.
(i) Tax. Depending on the structure and nature of a private fund adviser’s investment activities and/or client base, certain tax filings or tax compliance procedures may need to be undertaken. Examples include:
Investments by U.S. persons in non-U.S. entities may need to be disclosed on IRS Form 5471 (ownership in non-U.S. corporation), IRS Form 8865 (ownership in non-U.S. partnership) and IRS Form 8858 (ownership in non-U.S. disregarded entity), which forms are required to be filed together with such U.S. persons’ annual U.S. federal income tax returns.
Investments by non-U.S. persons in U.S. entities may need to be disclosed on IRS Form 5472 (25% ownership in a U.S. corporation).
Transfer of property by a U.S. person to a foreign corporation may require the U.S. person to file an IRS Form 926.
Ownership of interests in or signature authority over non-U.S. bank accounts and similar investments, may need to be disclosed under foreign bank and financial accounts reporting regime (FBAR) on Form FinCEN 114, the due date of which has been moved to April 15th for initial filings, with an automatic extension available to October 15th.
Advisers may need to report the existence of certain accounts to the U.S. IRS or their local jurisdiction under FATCA or the OECD Standard for Automatic Exchange of Financial Account Information – Common Reporting Standard.
Advisers should be aware that IRS Forms W-8 provided by non-U.S. investors generally expire after three years from the execution date of the form and they may need to collect updated IRS Forms W-8 from their non-U.S. investors.
Clients are urged to speak to their Gibson Dunn contacts if they have any questions or concerns regarding these or any other regulatory requirements.
 An RIA is required to prepare a supplemental brochure for each supervised person that (i) formulates investment advice for and has direct contact with a client, or (ii) has discretionary investment power over client assets (even if such person does not have direct client contact). As a practical matter, most private fund advisers prepare supplemental brochures for each member of their investment committees and/or each of their portfolio managers.
 As a technical matter, investors in a private fund are not considered "clients" of the fund’s investment adviser. As a matter of best practice, however, most private fund advisers make updated copies of their disclosure brochures available to the investors in their funds.
 Such letters must also provide a website address (if available), e-mail address (if available) and telephone number by which a client may obtain a copy of the RIA’s current disclosure brochure, as well as the website address through which a client may obtain information about the adviser through the SEC’s Investment Adviser Public Disclosure (IAPD) system.
 In particular, a hedge fund adviser with more than $1.5 billion in regulatory assets under management attributable to its hedge funds is required to report on Form PF on a quarterly basis within 60 days of the end of each calendar quarter and to complete an additional section of the Form (Section 2). A private liquidity fund adviser with more than $1.0 billion in combined regulatory assets under management attributable to both registered money market funds and private liquidity funds is required to report on Form PF on a quarterly basis within 15 days of the end of each calendar quarter and to complete an additional section of the Form (Section 3). A private equity fund adviser with more than $2.0 billion in regulatory assets under management attributable to its private equity funds is only required to file on an annual basis within 120 days of the end of its fiscal year, but is required to complete an additional section of the Form (Section 4).
 See Apollo Management V, L.P., et. al.¸ Advisers Act Release No. 4493 (Aug. 23, 2016); Blackstreet Capital Management, LLC, et. al., Exchange Act Release No. 77957, Advisers Act Release No. 4411 (Jun. 1, 2016); and Equinox Fund Management, LLC, Securities Act Release No. 10004, Exchange Act Release No. 76927, Advisers Act Release No. 4315 (Jan. 19, 2016). See also Cherokee Investment Partners, LLC, et. al., Advisers Act Release No. 4258 (Nov. 5, 2015); Fenway Partners, LLC, et. al., Advisers Act Release No. 4253 (Nov. 3, 2015); Blackstone Management Partners L.L.C., et. al., Advisers Act Release No. 4219 (Oct. 7, 2015); Kohlberg, Kravis Roberts & Co., Advisers Act Release No. 4131 (Jun. 29, 2015); and Alpha Titans, LLC, et al., Exchange Act Release No 74828, Advisers Act Release No. 4073, Investment Company Act Release No. 31586 (Apr. 29, 2015).
 Blackstreet Capital Management, LLC, et. al., Exchange Act Release No. 77957, Advisers Act Release No. 4411 (Jun 1, 2016).
 These violations included (i) diversion of fund assets to pay for political contributions, charitable donations, and business entertainment on behalf of the adviser, (ii) engaging in undisclosed affiliated transactions with the adviser’s funds, and (iii) multiple violations of the terms of the funds’ limited partnership agreements.
 See Artis Capital Management, L.P., et. al., Advisers Act Release No. 4550 (Oct. 13, 2016); Apollo Management V, L.P., et. al.¸ Advisers Act Release No. 4493 (Aug. 23, 2016),
 See OCIE Cybersecurity Initiative, National Exam Program Risk Alert, Vol. IV, Issuer 2 (Apr. 15, 2014); Cybersecurity Examination Sweep Summary, National Exam Program Risk Alert, Vol. IV, Issue 4 (Feb. 3, 2015), and OCIE’s 2015 Cybersecurity Examination Initiative, National Examination Program Risk Alert, Vol. IV, Issue 8 (Sept. 15, 2015). See also, Examination Priorities for 2015, National Exam Program, Office of Compliance Inspections and Examinations (Jan. 13, 2015); Examination Priorities for 2016, National Exam Program, Office of Compliance Inspections and Examinations (Jan. 11, 2016); and Examination Priorities for 2017, National Exam Program, Office of Compliance Inspections and Examinations (Jan. 12, 2017).
 See Examination Priorities for 2017, National Exam Program, Office of Compliance Inspections and Examinations (Jan. 12, 2017) at page 5.
 See, e.g., Centre Partners Management, LLC, Advisers Act Release No. 4604 (Jan. 10, 2017) and New Silk Road Advisors, Advisers Act Release No. 4587 (Dec. 14, 2016).
 See Personal Securities Transactions Reports by Registered Investment Advisers: Securities Held In Accounts Over Which Reporting Persons Had No Influence or Control, IM Guidance Update No. 2015-03 (June 2015).
 See Private Funds and the Application of the Custody Rule to Special Purpose Vehicles and Escrows, IM Guidance Update No. 2014-07 (Jun. 2014).
 To qualify as a passive institutional investor, an investment adviser must be an RIA that purchased the securities in question "in the ordinary course of business and not with the purpose or effect of changing or influencing the control of the issuer nor in connection with or as a participant in any transaction having such purpose or effect."
 The SEC maintains a definitive list of securities subject to Form 13F reporting at http://www.sec.gov/divisions/investment/13flists.htm.
 A "Large Trader" is defined as any person that exercised investment discretion over transactions in Regulation NMS securities that equal or exceed (i) two million shares or $20 million during any single trading day, or (ii) 20 million shares or $200 million during any calendar month.
Gibson, Dunn & Crutcher’s lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact any member of the Gibson Dunn team, the Gibson Dunn lawyer with whom you usually work, or any of the following leaders and members of the firm’s Investment Funds practice group:
Chézard F. Ameer – Dubai (+971 (0)4 318 4614, firstname.lastname@example.org)
Jennifer Bellah Maguire – Los Angeles (+1 213-229-7986, email@example.com)
Edward D. Sopher – New York (+1 212-351-3918, firstname.lastname@example.org)
Y. Shukie Grossman – New York (+1 212-351-2369, email@example.com)
Mark K. Schonfeld (+1 212-351-2433, firstname.lastname@example.org)
Edward D. Nelson – New York (+1 212-351-2666, email@example.com)
Marc J. Fagel (+1 415-393-8332, firstname.lastname@example.org)
C. William Thomas, Jr. – Washington, D.C. (+1 202-887-3735, email@example.com)
Gregory Merz – Washington, D.C. (+1 202-887-3637, firstname.lastname@example.org)
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