Funds Talk: December 2018

Topics covered in this issue include: 

• Deal Points Study: Representations and Warranties Insurance Continues Its Significant Influence on M&A Deal Terms
  Our 2018 Deal Points Study examines acquisition agreements for private target transactions and shows the continuing increased use of buyer-side representations and warranties insurance. These policies have caused changes to important provisions, and are now even influencing non-policy deals.
  
  
• Poor Compliance With Cash Solicitation Rule Prompts OCIE Risk Alert
  The staff of the SEC’s Office of Compliance Inspections and Examinations (the Staff) highlighted some recurring compliance issues with its cash solicitation rule. This rule regulates the provision of cash fees for the solicitation of prospective clients and contains obligations both for the adviser and the solicitor. Advisers should consider reviewing their policies in light of the Staff’s observations to ensure they are in compliance with the rule.
  
  
• Unregistered Crypto Exchange Fined by SEC
  

  As the SEC continues its enforcement activity against illicit cryptocurrency-related dealings, it has fined the founder of EtherDelta, in its first-ever enforcement action against a digital trading platform, for operating an unregistered national securities exchange. Over an 18-month period, EtherDelta's users executed more than 3.6 million orders, some of which were for tokens that are considered to be securities under federal law.
  
  

• New York Appellate Court Ruling Eases Hurdle to Bringing Derivative Suits Against UK Companies in the New York Courts
  

  A New York appeals court recently decided that plaintiffs in derivative suits involving U.K. companies are not required to obtain permission from the English High Court before pursuing their claims. The ruling would remove a hurdle to shareholders of U.K. companies seeking to bring derivative lawsuits in the New York courts.
  
  

• Changes to the Asset Management Framework in France
  The French government has issued an ordinance that introduces a third type of alternative investment fund, known as “specialized financing vehicles.” The vehicles combine the advantages of the existing specialized professional funds and securitization vehicles, and might become the optimal debt vehicle in Europe.
  
  
• IRS Paves the Way for Lenders to Obtain Guarantees and Collateral From (and 100% Stock Pledges of) Foreign Subsidiaries
  

  The IRS proposed regulations that would reduce the amount determined for certain domestic corporations that own stock in controlled foreign corporations. The regulations would ensure the Internal Revenue Code is consistent with the amendments introduced by the Tax Cuts and Jobs Act in 2017.