Hedge Funds – Page 3 – Global Investment Law Watch

United States: New Year, New CPO/CTA Exemption Affirmations and CPO FinCEN Requirements

Jan 03 2024

By: Clifford C. Histed, Kenneth Holston, and Cheryl L. Isaac

Happy New Year! As we kick off 2024, we note that the National Futures Association (NFA) published its annual Notice to Members with guidance on the annual affirmation requirement for certain exempt commodity pool operators (CPOs) and commodity trading advisors (CTAs). If you rely on an exemption or exclusion from CPO registration under CFTC Regulation 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), 4.13(a)(5) or 4.5, or an exemption from CTA registration under 4.14(a)(8), you must file an annual affirmation in the NFA’s Exemptions System by 29 February 2024, and a multi-factor authentication is now required for access. Failure to make this affirmation will result in your registration exemption being withdrawn on 1 March 2024.

In addition, the NFA also issued a Notice to Members regarding the Financial Crimes Enforcement Network (FinCEN) final rule implementing the Corporate Transparency Act beneficial ownership information (BOI) reporting requirements. Although CFTC-registered entities (including CPOs and CTAs) are exempt from these requirements (see 31 U.S.C. §5336(a)(11)(B)(xiv)), certain pooled investment vehicles will be required to comply. Commodity pools that are operated or advised by an SEC-registered broker-dealer or investment adviser are generally exempt, but a limited number of other commodity pools will be subject to the new rule.

Accordingly, CPOs with non-exempt commodity pools will need to file BOI reports with FinCEN, including identifying information about individuals who directly or indirectly own or control the commodity pool. FinCEN recently extended the BOI reporting deadline for certain reporting companies, with the relevant compliance dates as follows:

Commodity pools created or registered before 1 January 2024: file BOI reports by 1 January 2025.
Commodity pools created or registered in 2024: file BOI reports within 90 calendar days after registration is effective.
Commodity pools created or registered on or after 1 January 2025: file BOI reports within 30 calendar days after registration is effective.

For commodity pools created or registered after 1 January 2024, a CPO will also need to report information about the “company applicants,” meaning the individual or individuals who directly file the document that creates or registers the commodity pool.

Please feel free to contact the authors of this blog post with any questions.

Europe: ESMA Publishes Long-Awaited Final Report on ELTIF 2.0 Regulatory Technical Standards

Dec 20 2023

By: Gayle Bowen and Shane Geraghty

On 19 December, the European Securities and Markets Authority (ESMA) published its final report setting out draft Regulatory Technical Standards under the amended European Long-Term Investment Funds Regulation.

Asia: ICMA’s Code of Conduct for ESG Ratings and Data Products Providers – A Step Towards Consistent Global Standards

Dec 18 2023

By: Sook Young Yeu

The International Capital Market Association (ICMA) has released a voluntary code of conduct for ESG ratings and data products providers (the Code), reflecting recommendations by the International Organization of Securities Commissions (IOSCO). The Code is intended to be internationally interoperable and may be used by jurisdictions where no local code or regulation is in place.

Asia: Hong Kong Backs Industry-led Voluntary Code for ESG Ratings and Data Products Providers

Nov 02 2023

By: Sook Young Yeu

The Securities and Futures Commission in Hong Kong (SFC) has announced its support for the development of a voluntary code of conduct (VCoC) for ESG ratings and data products providers. The proposed VCoC, which will be open for ESG ratings and data products providers to sign up voluntarily, and will align with international best practices as recommended by the International Organization of Securities Commissions.

United States: SEC Publishes Its 2024 Exam Priorities—Early

Oct 23 2023

By: Jennifer Klass and Wiley Cole

On 16 October 2023, the Division of Examinations (the Division) of the US Securities and Exchange Commission (SEC) released its examination priorities for the 2024 fiscal year. In an interesting twist, the SEC released the examination priorities early, changing the timing to correspond to the beginning of its new fiscal year.

Asia: Updates to Tax Incentives for Single Family Offices

Oct 20 2023

By: Edward Bennett

The Monetary Authority of Singapore (MAS) has recently introduced new guidelines for Single Family Offices (SFOs) applying for tax incentives under the Section 13O and Section 13U schemes. The changes aim to expand tax incentives for family offices to promote investment in environmental and social causes.

Global: ICYMI: Integrity Council Launches Global Benchmark and Core Carbon Principles for Voluntary Carbon Markets

Aug 18 2023

By: Cheryl Isaac and Christine Mikhael

In case you missed it: late last month, the Integrity Council for the Voluntary Carbon Market (“ICVCM”) launched its Core Carbon Principles (CCPs) and Program-level Assessment Framework (Framework). With the publication of these new standards (developed with the input of hundreds of stakeholders in the voluntary carbon markets), we now have a set of fundamental principles for high-quality credits that create a verifiable climate impact, and a framework for determining whether carbon credit programs are eligible to label themselves as being in compliance with the CCPs.

United States: SEC Charges 11 Firms with Record Retention Violations

Aug 11 2023

By: Neil Smith , Hayley Trahan Liptak and Peter Shanley

For over twenty months, the U.S. Securities and Exchange Commission (SEC) has steadily announced settled orders against broker-dealers and investment advisers for failure to retain business-related communication. On 8 August 2023, the SEC released another round of settled orders with 11 firms for violation of Exchange Act Rule 17a-4 for failing to retain off-channel business-related communication. One dually registered broker-dealer and investment adviser was also charged with violating recordkeeping provisions of the Investment Advisers Act of 1940. The content of the orders, and the firms involved, show the SEC’s attention may be shifting from wide-spread violations at large institutions to more limited compliance failures at firms of differing sizes. The assessed penalties, although still considerable, are consistent with this shift.

United States: Tag, You (Maryland Closed-End Funds) Are It!

Jun 30 2023

By Jennifer R. Gonzalez and Nicholas O. Ersoy

In May 2020, the Division of Investment Management Staff of the U.S. Securities and Exchange Commission published a Statement withdrawing a November 2010 letter issued to Boulder Total Return Fund, relating to the Maryland Control Share Acquisition Act (MCSAA), which had long been an impediment to closed-end funds opting in to state statutes that permit corporations to restrict certain stockholders’ ability to vote “control shares” (shares of a corporation which, when aggregated with all shares of such corporation owned by an acquiring person, exceed certain ownership thresholds). Following the May 2020 Staff Statement, a number of closed-end funds opted in to state control share statutes or adopted by-law provisions with similar impact. Further developments since then include:

United States: New Conference, More Rulemaking?

May 22 2023

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At the Conference On Emerging Trends In Asset Management sponsored by the US Securities and Exchange Commission (SEC) and held 19 May 2023, Chair Gary Gensler, and Director of the SEC’s Division of Investment Management, William Birdthistle, called for greater discourse with industry participants and highlighted the strengths of recent rulemaking activities of the SEC.

Mr. Birdthistle kicked off the conference by referring to funds and investment advisers as “critical agents” in the investment management industry and in advancing the SEC’s mission. He also acknowledged the need for the SEC and its staff to be open to different opinions. He did not, however, indicate how such different views have been—or would be—addressed in the rulemaking process or otherwise.

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