Industry Update

Congressional Hearing Held on Hedge Fund Regulation

Prominent hedge fund managers were among those who testified before the House Committee on Oversight and Government Reform (the "Committee") on November 13, 2008, in a hearing aimed at examining the role of hedge funds in the current financial crisis and determining appropriate levels of government oversight of hedge funds.  There was a general consensus among the hedge fund managers and lawmakers about the need for greater transparency and additional regulation within the hedge fund industry.  Indeed, most of the hedge fund managers supported a requirement to provide additional information to regulators on a confidential basis.

Kenneth Griffin, CEO of Citadel Investment Group, spoke out against greater regulation of the industry, but indicated that he would not ultimately be averse to such regulation if it furthered fair, competitive and liquid financial markets.  John Paulson, president of Paulson & Co., noted the need to reduce leverage in the financial system by raising margin requirements.  George Soros, founder of Soros Fund Management, testified that regulators had to "accept responsibility for controlling asset bubbles," including controlling credit.  In addition, Mr. Soros indicated that it would be advantageous to reactivate certain measures that have fallen into disuse, such as margin requirements.  Mr. Soros also noted that implementing or removing regulation is a delicate balancing act with potentially negative consequences at either extreme, as exemplified by the current financial crisis which, in Mr. Soros's view, resulted from excessive deregulation.

James Simons, director of Renaissance Technologies, suggested requiring "all market participants to report their positions to an appropriate regulator and then allowing the New York Fed to have access to aggregate position information and to recommend action, if necessary."  Mr. Simons noted, however, that a fund's specific information should not be released publicly.  Additionally, Mr. Simons did not oppose the idea of regulation in the form of more detailed reporting to the SEC, with the information aggregated and passed to the Federal Reserve.

With respect to the tax treatment of hedge fund managers' income, Mr. Griffin testified that he was in favor of consistent treatment of long-term capital gains taxes, regardless of whether those capital gains were generated by a hedge fund manager or any other market participant (i.e., oil and gas and other partnerships).  Philip Falcone, senior managing director of Harbinger Capital Partners, agreed that it was important not to differentiate between hedge fund managers and people in other sectors who receive income from partnerships in regard to tax rates.  Mr. Paulson espoused the view that the current tax system is fair and does not create a loophole for hedge fund managers. 

In addition to hedge fund managers, the Committee also heard testimony from several scholars.  Professor Joseph Bankman of Stanford Law School was critical of the current policy of taxing carried interest at the capital gains rate rather than at the ordinary income rate.  The scholars generally agreed on the importance of hedge fund regulation, however, they differed on the type of framework that would be optimal effecting such regulation.  MIT professor and hedge fund manager Andrew Lo suggested that large hedge funds should be overseen by the Federal Reserve Bank, while Northwestern School of Law professor emeritus and former SEC Chairman David Ruder favored a joint regulatory approach in which the SEC would oversee hedge funds and share risk information with the Federal Reserve.  Finally, the scholars generally concurred that hedge funds were not the primary cause of the financial crisis; only Professor Bankman took a contrary position. 

Acting CFTC Chairman Lukken Calls for Regulatory Overhaul

On November 11, 2008, Acting CFTC Chairman Walter Lukken delivered a speech at a Futures Industry Association event in which he called for a dramatic overhaul of the current financial regulatory system.  Lukken advocated a complete replacement of the current regulatory framework with a new, "objectives-based," system composed of three new agencies:  a Systemic Risk Regulator, a Market Integrity Regulator and an Investor Protection Regulator.  "The different functions of the CFTC, as well as the SEC and the various banking regulators, would be dispersed among these three regulatory authorities," said Lukken. 

Highlighting conceptual similarities between his proposal and reforms previously proposed by Treasury Secretary Henry Paulson, Lukken elaborated on his vision.  First, Lukken explained that the role of the new Systemic Risk Regulator would be to police the financial system for "black swan" risks that could cause a "contagion event" across financial markets and to take preventative measures to avoid such occurrences.  Next, Lukken noted that the new Market Integrity Regulator would exercise oversight over "the safety and soundness of key financial institutions," such as exchanges and commercial banks, whose failure could jeopardize market integrity.  Finally, Lukken indicated that the new Investor Protection Regulator would broadly protect investors and oversee business conduct across all firms in the marketplace.

According to Lukken, this objectives-based framework would improve market transparency, especially in currently unregulated, over-the-counter, markets.  Lukken explained that this new structure would require the "reporting of exchange and over-the-counter market data to regulators," especially when products begin to play a "public pricing role" or when their size "creates the risk of a systemic event."  Lukken added that the credit default swap market would clearly meet this threshold.  By focusing on identified public risks, rather than "futile and difficult determinations of whether an instrument is a security, a future, or a swap," Lukken claimed that his proposed system would ensure the proper regulation of all products and institutions. 

Lukken acknowledged that in order to implement his proposal, "a complete rewrite" of the laws and regulations currently governing the financial system would be required.  In furtherance of this transformative process, Lukken advocated the creation of a bipartisan Congressional committee to study the advancement of financial reform, provided, however, that the committees with current jurisdiction over the CFTC-the Agriculture Committees-are adequately represented therein.  According to Lukken, the input of the Agriculture Committees would be invaluable due to their extensive experience with "risk management markets and the regulation of exchange traded derivatives."

Lukken also advocated the creation of a unified regulatory board-consisting of the heads of the SEC, the Federal Reserve and the CFTC-as an interim measure to eliminate regulatory gaps through the facilitation of  information sharing and joint rule-making. Notably, Lukken's proposals for reform differ from those advanced by SEC Chairman Christopher Cox, who has asked Congress to merge the SEC with the CFTC.  According to Lukken, a merger of the CFTC and the SEC would be ineffective and merely "reinforce our outdated regulatory structure." 

In his closing remarks, Lukken also emphasized the necessity of creating of a credit default swap clearinghouse.  "[C]learinghouses ensure that every buyer has a guaranteed seller and every seller has a guaranteed buyer, thus minimizing the risk that one counterparty's default will cause a systemic ripple through the markets," said Lukken, adding that "[c]learing brings enhanced transparency, standardization and risk management to these products at a time when it is most needed."

Treasury Secretary Paulson Calls for Oversight of Hedge Funds

On November 20, 2008, Treasury Secretary Henry Paulson delivered a speech at The Ronald Reagan Presidential Library in which he called for the regulation of hedge funds.  Laying out his recommendations for regulatory reform, Paulson proposed the advent of a new, objectives-based regulatory model, which would include a "market stability regulator" empowered to review "any systemically important financial company" and "look for problems anywhere in the financial system in order to protect against systemic risk."  Paulson explained that in order for this market stability regulator to effectively serve its function, "large, systemically-important institutions, including hedge funds, should be required to have a charter that would permit some type of oversight." 

In elaborating on his vision for institutional oversight, Paulson stated that reforms of the federal bankruptcy system are needed to allow for the "orderly wind-down" of "non-depository institutions that may be too big or too interconnected to fail."  As a corollary, Paulson noted that any "financial product whose market size presents a systemic issue" should also be subject to regulation.  In describing his views on financial product regulation, Paulson also called for a re-evaluation of the originate-to-distribute securitization model, noting that "each party in the product chain" for a "significant financial product" should bear "responsibility or potential risk."

Turning to the issue of disclosure, Paulson discussed the need for greater transparency.  Noting that "complexity often hides risk," Paulson explained that more understandable disclosure would be beneficial to the financial system and that "greater standardization would . . . improve market transparency."  In this connection, Paulson indicated that centralized clearing and other measures to strengthen trade processing would be salutary steps to promote standardization and transparency. 

Paulson also exhorted policymakers and regulators to examine the compensation practices of the financial services sector.  Paulson stated that financial services industry compensation practices "should not encourage unsafe and unsound risk taking or reward failure," especially in light of the role financial services firms play in "supporting and sustaining" economic activity.

In detailing his recommendations, which were initially set forth in his "Blueprint for Regulatory Reform" released last March, Paulson emphasized the need for a complete regulatory overhaul, noting that "simply adding new regulations won't be a long-term solution."  Paulson explained that a new regulatory framework, which includes "market infrastructure, transparency and wind-down authorities," could strike a balance between "market discipline and regulatory oversight," adding that "no institution should be deemed to be too interconnected or too big to fail."

IOSCO Establishes International Task Forces

The SEC announced in a November 24, 2008 press release that the International Organization of Securities Commissions ("IOSCO") Technical Committee has established three international task forces to study some of the major issues facing international securities regulators.  The IOSCO is an international policy forum that brings together securities regulators responsible for regulating over 90% of the world's securities markets.  The IOSCO Technical Committee is chaired by SEC Chairman Christopher Cox.  In a statement following the meeting of the IOSCO Technical Committee, Chairman Cox referred to the establishment of the international task forces as an effort to take "urgent action to coordinate global regulatory measures," and added that the task forces will "help ensure that global capital markets address the current turmoil on a sound basis and in a well-coordinated way."  The task forces will work to coordinate international regulatory solutions in connection with (i) abusive short-selling, (ii) the regulation of over-the-counter markets for derivatives and other structured financial products and (iii) the regulation of unregulated financial entities such as hedge funds.  Below is a brief summary of the role of each task force.

  • Abusive Short Selling.  The task force will study methods to effectively regulate abusive short selling, including imposing delivery requirements and disclosure of short positions.  The task force will also examine ways to minimize the impact of such regulations on legitimate securities lending practices and hedging.  The task force will be chaired by the Securities and Futures Commission of Hong Kong.
  • Unregulated Financial Markets and Products.  The task force will study ways to improve the transparency and regulatory oversight of unregulated financial markets, such as those for over-the-counter derivatives and other structured financial products.  The task force will be co-chaired by the Australian Securities and Investments Commission and the Autorité de Marché Financiers of France.
  • Unregulated Financial Entities.  The task force will study issues associated with unregulated financial entities such as hedge funds, including examining regulatory approaches to increasing their transparency and mitigating risks associated with certain trading practices.  The task force will be chaired by the CONSOB of Italy and the Financial Services Authority of the United Kingdom.

The three task forces will present their reports at the next IOSCO Technical Committee meeting in February 2009 and at the next G-20 summit in spring 2009.

SEC, CFTC and Federal Reserve Board Enter into Memorandum of Understanding Regarding Central Counterparties for Credit Default Swaps

On November 14, 2008, SEC Chairman Christopher Cox executed, on behalf of the SEC, a Memorandum of Understanding ("MOU") with the Federal Reserve Board and the Commodities Futures Trading Commission ("CFTC") regarding the establishment of a central counterparty ("CCP") for credit default swaps.  The MOU establishes a framework for consultation and information sharing on issues related to the establishment of a CCP for credit default swaps.

The MOU was executed as part of the agenda of the President's Working Group on Financial Markets ("PWG") (which is chaired by the Treasury Secretary and includes all of the parties to the MOU) to establish one or more CCPs for the credit default swap market by the end of 2008.  The PWG announced in its November 14, 2008 press release (the "PWG Press Release") that its "top near-term OTC derivatives priority is to oversee the successful implementation of central counterparty services for credit default swaps."  The PWG has made establishing a CCP a top priority because it believes a CCP can reduce the systematic risk associated with counterparty credit exposure, help facilitate greater transparency of credit default swaps and possibly lead to the establishment of an exchange trading system for the credit default swap market.

The MOU "does not create legally binding obligations," but instead formalizes the parties' "intent to cooperate, coordinate and share information."  The PWG Press Release announced that several potential CCP providers have initiated proposals to serve as the CCP for the credit default swap market.  Regulators are currently assessing the proposals and conducting "on-site reviews of risk management and other key design elements."

In addition to executing the MOU, SEC Chairman Christopher Cox has made repeated calls for increased regulation and transparency of the credit default swap market, including legislation that would (i) require public disclosure of credit default swap trades, (ii) grant rule-making authority to the SEC to issue rules against fraudulent, manipulative and deceptive acts in connection with credit default swaps and (iii) establish a mandatory exchange-like trading system for credit default swaps.

Separately, the New York State Department of Insurance has revised its plan to regulate credit default swaps by indefinitely delaying it, and two separate bills to regulate credit default swaps have been proposed to the lame-duck Congress.

See the Davis Polk Newsflashes summarizing these developments:

FinCEN Withdraws AML Rules Proposed for Unregistered Investment Companies, Commodity Trading Advisors and Investment Advisers

On October 30, 2008, the Financial Crimes Enforcement Network ("FinCEN") of the U.S. Treasury Department announced the withdrawal of proposed anti-money-laundering program rules ("Proposed AML Rules") for unregistered investment companies, commodity trading advisors and investment advisers.  The Proposed AML Rules for unregistered investment companies have been pending since September 26, 2002, and the Proposed AML Rules for commodity trading advisors and investment advisers have been pending since May 5, 2003.

As reported in the September 2002 Investment Management Regulatory Update, the Proposed AML Rules would have applied primarily to hedge funds, not to private equity or venture capital funds, because part of the definition of "private investment company" in the proposed rules included a limitation that the fund permit investors to redeem ownership interests within two years of purchase.  If adopted, the Proposed AML Rules would have required hedge funds to (i) implement AML policies and procedures, (ii) provide for independent testing of compliance, (iii) designate an AML compliance officer and (iv) conduct employee training in AML policies and procedures.

FinCEN explained that its primary reason for withdrawing the Proposed AML Rules related to the passage of time since the rules were initially proposed.  The FinCEN press release also stated that hedge funds, investment advisers and commodity trading advisors are not entirely outside the regulatory scheme of the Bank Secrecy Act ("BSA").  The BSA imposes AML program requirement for banks, broker-dealers and futures commission merchants.  As a practical matter, the financial transactions of unregistered investment companies, investment advisers and commodity trading advisors must be conducted through the types of institutions directly subject to AML program requirements under the BSA.  FinCEN stated that while it "continues to consider the extent to which BSA requirements should be imposed on [unregistered investment companies, commodity trading advisors and investment advisers], their activity is not entirely outside the current BSA regulatory regime."

FinCEN did not rule out the possibility of imposing new AML program rules in the future for the types of entities that would have been subject to the Proposed AML Rules  However, it stated that "it will not proceed with BSA requirements for these entities without publishing new proposals and allowing for industry comments."

Sec Rules and Regulations

SEC Adopts Rules Requiring Use of Summary Prospectus for Mutual Funds

On November 19, 2008, the SEC voted unanimously to approve a rule amendment requiring mutual funds to provide a concise, summary prospectus to appear at the front of a fund's detailed statutory prospectus.  The SEC also approved a new prospectus delivery option for mutual funds, which will allow mutual funds to satisfy prospectus delivery requirements by mailing only a summary prospectus to investors, provided that the summary prospectus, the statutory prospectus and other specified information are available online.  The new disclosure rules were proposed on November 21, 2007 (as reported in the December 2007 Investment Management Regulatory Update) and were approved after extensive review and comment.

Summary Prospectus Requirement

The first rule will amend Form N-1A, the registration form for mutual funds, to require a brief summary prospectus at the front of a mutual fund's lengthy statutory prospectus.  As described in the SEC press release announcing the approval of the rules, the new Form N-1A will require mutual funds to concisely describe the following information at the front of the statutory prospectus "in plain English and in a standardized order":

  • the fund's investment objectives, primary investment strategies, risks and costs;
  • the fund's investment advisers and portfolio managers;
  • the fund's purchase and sale procedures;
  • the tax consequences of an investment in the fund; and
  • financial intermediary compensation.

In addition, summary prospectuses may not contain information on multiple funds.  Instead, key information for each fund in a family of funds must be described separately in its own summary.  Current rules allow for disclosures covering multiple funds to be integrated in a single statutory prospectus.

Of particular note, the SEC decided to remove the requirement initially proposed as part of the proposed rule in November 2007 that mutual funds disclose their top ten security holdings.  In addition, the proposed rule would have required that mutual funds update their summary prospectuses quarterly, but the final rule will require funds to update their summary prospectuses only annually.

SEC Chairman Christopher Cox stated that "[t]he summary prospectus will quickly give investors a basic understanding of the fund and will permit them readily to compare one fund to another."  However, summary prospectuses will also compel mutual funds to briefly summarize risk factors and other important disclosures that they customarily describe at length in statutory prospectuses.

New Prospectus Delivery Option

The SEC also adopted a new rule that permits mutual funds to satisfy prospectus delivery requirements pursuant to Section 5(b)(2) of the Securities Act of 1933 by mailing investors a summary prospectus, provided that the summary prospectus, the statutory prospectus and other specified information are made available online.  The summary prospectus delivered to investors must contain the same information, in the same order, as required by the new Form N-1A.  The SEC press release announcing the approval of this rule described the following additional guidelines for a mutual fund that elects to use a summary prospectus to satisfy its prospectus delivery requirement:

  • The online documents must be in a user-friendly format, which allows investors to click back and forth between the summary prospectus and the statutory prospectus.
  • Investors must be able to download and retain an electronic version of the documents.
  • Mutual funds must provide paper or email delivery of the summary and statutory prospectuses to investors upon request.

The SEC has yet to release the full text of the new disclosure rules.  The rules are effective on February 28, 2009, and funds must begin complying with the form changes on January 1, 2010.

SEC Mandates Electronic Filing of Investment Company Act Exemption Applications

On October 29, 2008, the SEC adopted rule amendments, effective January 1, 2009, which will require the electronic filing on EDGAR of new or amended applications for orders under the Investment Company Act of 1940 (the "Investment Company Act") by mutual funds and other companies seeking exemptive relief. 

The amendments also mandate the electronic submission of Regulation E filings by small business investment companies and business development companies and eliminate the temporary hardship exemption for filers of Investment Company Act filings experiencing technical difficulties.  In addition, the amendments eliminate the requirements that filers notarize application verifications and fact statements which accompany applications and submit draft notices with applications.

Notably, the amendments will not modify the filing requirements pertaining to applications for orders under the Investment Advisers Act of 1940, which will continue to be filed in paper format separately from applications under Investment Company Act.  Of further note, requests for confidential treatment of information will continue to be required in paper format.

The SEC release announcing the amendments states that the changes "will enable investors to access these filings sooner and the [SEC] to consider them more quickly."  In statements included in the release, SEC Chairman Christopher Cox added that the amendments "will significantly improve public access to exemptive applications through the Internet, and at the same time will eliminate unnecessary administrative requirements for filers." 

SEC Releases Core Initial Request for Information List for Investment Adviser Examinations

The Office of Compliance Inspections and Examinations of the SEC ("OCIE") recently released a list of the type of core information (the "Core Information List") that the OCIE staff will generally request during routine inspections of investment advisers.  The Core Information List focuses on the type of information that is requested from firms providing "traditional money management services to non-fund clients."  Investment advisers conducting additional activities, such as sponsoring a family of registered investment companies, sponsoring privately offered funds, participating in PIPES offerings, offering separately managed or wrap-fee accounts or being a registered broker-dealer or manager of managers, will be asked to provide both the information set forth in the Core Information List as well as "additional information" that will allow the OCIE staff to evaluate the investment adviser's compliance with respect to such additional activities.

Under Rule 206(4)-7 of the Investment Advisers Act of 1940 (the "Advisers Act"), investment advisers registered with the SEC are required to implement written policies and procedures designed to promote compliance under the Advisers Act, designate a chief compliance officer to administer such written policies and procedures and conduct annual reviews to evaluate the adequacy and effectiveness of their compliance program.  Examinations by the OCIE staff of an investment adviser focus on evaluating the effectiveness of the investment adviser's compliance program in relation to the specific risks facing that particular investment adviser.  Examinations indicating deficiencies generally result in non-public deficiency letters requesting corrective action.  Examinations that reveal deficiencies rising to the level of serious misconduct may be referred to the SEC's enforcement division for further investigation.

The OCIE staff may request copies of certain items on the Core Information List, and may request only access to other items.  Some of the key items included in the Core Information List that will be requested from an investment adviser during an initial examination are set forth below.

General Information.  Examiners will request general information regarding an investment adviser's business, such as its organizational structure, fee structure, types of services performed, disclosure documents and information relating to joint ventures with respect to the firm or any affiliate.

Information Regarding the Compliance Program, Risk Management and Internal Controls.  Examiners will request information regarding an investment adviser's compliance program, such as the written policies and procedures which govern the compliance program, and details regarding any analyses or tests performed to improve the effectiveness of those policies and procedures.  Examiners will also request additional types of information with respect to risk management and internal controls including:

  • an inventory of the compliance risks facing the investment adviser;
  • written guidance provided to employees regarding on-going risk identification and assessment;
  • information relating to remote office and independent contractor oversight;
  • information relating to valuation procedures;
  • annual or interim reviews of policies and procedures; and
  • records documenting instances of non-compliance and client complaints.

Information to Facilitate Testing with Respect to Advisory Trading Activities.  Examiners will request information regarding the details and mechanics of an investment adviser's client accounts, such as dates of inception, whether the client is affiliated with the investment adviser, account statement delivery procedures and fee computation procedures.  Examiners will also request information regarding:

  • portfolio management, such as interests held per client, minutes of investment committee meetings and most profitable and least profitable investment decisions;
  • brokerage arrangements, such as best execution evaluation, soft dollar budget and information regarding affiliated broker-dealers; and
  • potential conflicts of interest and/or insider trading, such as insider trading policies and procedures, procedures in effect to control non-public information and fee splitting or revenue sharing arrangements.

Information to Perform Testing for Compliance in Various Areas.  Examiners will request information and documentation relating to advertising and marketing, such as pitch-books, presentations, website access and advertisements used to inform or solicit clients.  Examiners will also request copies of the investment adviser's financial statements and other financial records, confirmation that account statements are sent directly to clients and copies of anti-money-laundering policies and procedures.

Litigation

Delaware Court Holds That Statute of Frauds Applies to LLC Agreements

On October 22, 2008, the Delaware Court of Chancery held as a matter of first impression that the Delaware statute of frauds applies to limited liability company operating agreements (Olson v. Halvorsen, Del Ch., C.A. No. 1884-VCL (Oct. 22, 2008)).  The statute of frauds refers to the requirement that certain kinds of contracts be made in writing and signed.  For example, a contract that by its terms cannot be completed within one year is subject to the statute of frauds.  This decision, therefore, limits the ability of LLCs to operate under oral LLC agreements in reliance upon the Delaware Limited Liability Company Act (the "LLC Act").

The plaintiff in this case, Brian T. Olson, was a founder of a hedge fund who sued his former partners regarding the amount of money owed to him upon his removal from the company.  The operating agreement (the "Operating Agreement") upon which Olson relied in asserting his claim provided that he was entitled to a multi-year earn-out that would be paid to him over a six-year period.  The Operating Agreement was not signed by any of the parties. 

The LLC Act expressly permits oral operating agreements but does not address whether the statute of frauds applies to such agreements.  The Court held as a matter of first impression that the statute of frauds does apply but that oral LLC agreements that do not fall under the statute of frauds would remain enforceable.  In this case, the Court determined that the terms of the multi-year earn-out provision in the Operating Agreement could not have been completed by the parties within one year from the date of the agreement, and therefore, the Court dismissed the plaintiff's claim based on the defendant's statute of frauds defense.  This decision highlights the necessity of executing fund operating agreements promptly in order to reliably enforce them.

SEC Charges Lazard Capital Markets and Former Employees with Improper Gratuities to Fidelity

On October 30, 2008, the SEC charged Lazard Capital Markets LLC ("Lazard"), a privately held, registered broker-dealer, for its failure to supervise three employees who collectively spent over $600,000 improperly entertaining traders at FMR Co., Inc. ("Fidelity Investments") in order to generate brokerage business.  In addition, the SEC charged three former Lazard employees and a former Lazard supervisor for their roles in the securities laws violations of the Fidelity Investments traders (the "Traders").

Earlier this year, the SEC charged the Traders with violating Section 17(e)(1) of the Investment Company Act of 1940 ("Section 17(e)(1)") by accepting gratuities from the three former Lazard employees.  Section 17(e)(1) prohibits affiliated persons of a registered investment company from accepting compensation (other than wages from the registered investment company) for the purchase or sale of property on behalf of the registered investment company.  The SEC maintains that the three former Lazard employees aided and abetted the Traders' violations through the provision of the improper compensation upon which the Traders' violations of Section 17(e)(1) were predicated.  The SEC further alleges that Lazard, the former Lazard supervisor and one of the aforementioned former Lazard employees (who had supervisory responsibilities) failed to supervise the former Lazard employees during their misconduct.

Lazard agreed to settle the charges through the payment of $1,817,629 in disgorgement, $429,379 in interest and a $600,000 penalty.  The three former Lazard employees (including the former Lazard employee with supervisory responsibilities) settled the charges by agreeing to pay penalties ranging from $25,000 to $75,000 and by being suspended from associating with a broker, dealer or investment company for time periods ranging from three to six months.  Finally, the former Lazard supervisor settled the charges by agreeing to pay a $60,000 penalty and by being suspended from associating in a supervisory capacity with a broker or dealer for a period of six months.  In so settling, the parties neither admitted nor denied the allegations against them. 

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If you have any questions regarding the matters covered in this Regulatory Update, please contact any of our Investment Management Group lawyers listed below or your regular Davis Polk contact:

John Crowley, Partner
212-450-4550 | john.crowley@dpw.com

Nora Jordan, Partner
212-450-4684 | nora.jordan@dpw.com

Yukako Kawata, Partner
212-450-4896 | yukako.kawata@dpw.com

Leor Landa, Partner
212-450-6160 | leor.landa@dpw.com

Danforth Townley, Partner
212-450-4240 | danforth.townley@dpw.com

Sophia Hudson, Associate
212-450-4762 | sophia.hudson@dpw.com