Since the last issue of our IM Update, we have also published the following separate Alerts of interest to the investment management industry:

SEC Brings First Action Against a Private Equity Fund Adviser for Misallocation of Portfolio Company Expenses

September 23, 2014

On September 22, 2014, the SEC charged private equity fund adviser Lincolnshire Management, Inc. (“Lincolnshire”) with breaching its fiduciary duty to two of its private equity funds by improperly benefiting one fund over the other by misallocating expenses. The case against Lincolnshire is the SEC’s first enforcement action against a private equity firm for its alleged misallocation of expenses among commonly managed funds. Lincolnshire agreed to pay approximately $2.3 million to settle the SEC’s charges, including a $450,000 penalty.

CFTC Provides Exemptive Relief for Commodity Pool Operators Relying on the JOBS Act’s General Solicitation Amendments and Clarifies Certain Recordkeeping and Reporting Requirements Applicable to Certain Registered CPOs

September 12, 2014

The CFTC’s Division of Swap Dealer and Intermediary Oversight (the “Division”) issued a series of exemptive and no-action letters applicable to commodity pool operators (“CPOs”). These letters facilitate the use of the JOBS Act general solicitation provisions by private fund managers that are relying on exemptive relief under CFTC Rules 4.7(b) or 4.13(a)(3), permit greater use of third-party recordkeepers by registered CPOs, and clarify reporting requirements for certain registered CPOs.

SEC Adopts Reforms for Money Market Funds

August 5, 2014

On July 23, 2014, the SEC voted three-to-two to adopt significant new reforms for money market funds (“MMFs”). The reforms are intended to reduce the susceptibility of MMFs to heavy redemptions during times of economic stress, mitigate potential contagion to the financial system stemming from such redemptions, increase the transparency of the risks of MMFs, and according to the SEC, preserve, “as much as possible,” the benefits currently afforded by MMFs. The Final Rule makes extensive changes to the rules governing MMFs, including the elimination of the long-standing ability of certain types of MMFs to maintain a stable $1.00 share price, and the addition of complex provisions regarding discretionary and mandatory imposition of liquidity fees and redemption gates.