May 17, 2022

Relevant Context, Potential Impact and Likelihood of Adoption of the SEC’s Proposed SPAC Rules

After the meteoric rise of special purpose acquisition companies (SPACs) in 2020 and 2021, the market has cooled considerably as their value proposition has been called into question and regulators have given the structure more attention. Amidst SPACs’ waning popularity, the SEC swooped in on March 30, 2022, to propose new rules and amendments (Proposal) for the nascent SPAC industry. The SEC’s intention was to bring de‑SPAC acquisitions of target companies, disclosures and other elements of the SPAC process in line with traditional IPO standards. There is concern in the industry, however, that the requirements in the Proposal could be the final blow that cripples the fledgling industry in the short term, albeit with potential long-term benefits. This article reviews the boom and cooling of the SPAC market over the last several years; SEC speeches and enforcement actions directed at the SPAC industry that preceded the Proposal; the items addressed in the Proposal; the potential impact of the Proposal on the SPAC industry; and the likelihood of the Proposal being adopted as written. See our two-part series: “SEC Scrutiny, Alignment Share Structures and Other Trends in SPAC IPOs and De‑SPAC Transactions” (May 25, 2021); and “Factors for Structuring De‑SPAC Transactions and Negotiating Points When Selling to a SPAC” (Jun. 1, 2021).

Japan As a Financial Center: How Its International Financial City Initiative Could Benefit PE Managers

Since the fall of 2020, Japan’s International Financial City Initiative policy (IFC Policy) has reshaped the regulatory landscape for the asset management industry by introducing a series of dynamic legislative and regulatory changes to incentivize foreign asset managers to go to Japan. In addition, although most of the IFC Policy initiatives are targeted at new managers, the Financial Services Agency of Japan has indicated its willingness to consider offering English-language supervision opportunities to existing managers. In a guest article, Tsuguhito Omagari and Yuki Sako, partner and counsel, respectively, at K&L Gates, provide an overview of certain regulatory changes under the IFC Policy and analyze what those changes would mean for PE managers. Specifically, the article considers the implications of the new English-language registration and supervision program; parameters of the two new registration exemptions; and features of the financial incentive program. For coverage of previous trends in Asia, see “K&L Gates Program Discusses the Ins and Outs of Global Fundraising for Fund Managers: The Asia-Pacific Region (Part Two of Two)” (Jun. 28, 2018).

Compliance Challenges in the Current Environment: Useful Anecdotes From PE Sponsor CCOs (Part One of Two)

Every PE sponsor operates with different objectives, resources and personnel, so logically, the challenges faced by CCOs differ across the industry. Nonetheless, all PE sponsors are confronting the onslaught of SEC rulemaking of late and trying to discern the best way to leverage their resources to be prepared. In that case, it can be helpful to hear what steps CCOs from other PE sponsors are taking so that anecdotal lessons and tips can be applied. Those were addressed at the Investment Company Institute (ICI) 2022 Investment Management Conference in a panel moderated by Tamara Salmon, ICI’s associate GC, which featured several CCOs, including Brian Harris from State Street Global Advisers, Michael F. Hogan from Charles Schwab Investment Management Inc. and Christina E. Sears from American Beacon Funds. The program also featured Peter Driscoll, PwC partner and former Director of the SEC’s Division of Examinations. This first article in a two-part series contains useful anecdotes from CCOs about ways they are allocating their resources to manage challenges from the recent proliferation of SEC rules and amendments. The second article will relay the CCOs’ thoughts on the evolving approach of the SEC’s Division of Enforcement; what they expect from the SEC going forward; trends as to CCO liability; and the handling of environmental, social and governance issues. For coverage of a previous ICI panel, see “SEC Examinations and Enforcement Officials Discuss Key Regulatory Issues for Investment Advisers” (May 18, 2021).

ESG Triggers, Restricted Secondaries Activity and Other Ways the Russia/Ukraine War Is Affecting PE Investments (Part Two of Two)

Even if fund managers do not actively invest directly into Russia, the war in Ukraine is factoring into their investment decisions. For example, questions have been raised about how the war fits into a firm’s environmental, social and governance (ESG) policies, including how far downstream managers need to verify there is no connection with Russia. To explore those issues, the European Fund and Asset Management Association hosted a webinar providing a market overview of the ramifications from Russia’s invasion that featured Simmons & Simmons attorneys Ian Rogers, Tristram Lawton and Basil Woodd‑Walker. This second article in a two-part series examines potential ESG implications for asset managers; ways sanctions impact the secondary market and handling of private credit; and potential protections offered by investor treaties. The first article outlined the scope of sanctions enacted by the U.S., E.U. and U.K. against Russia and key figures connected thereto, as well as how that is impacting fund managers’ actions with affected investors. See our three-part series on contingent dislocation funds and market disruptions: “Appeal, Application and Adoption Before Adverse Events” (Mar. 15, 2022); “Unique Mechanisms That Position Them to Pounce” (Mar. 22, 2022); and “Suitable Fund Participants and Potential Downsides to Avoid” (Mar. 29, 2022).

Compliance Takeaways From the Latest GDPR Enforcement Statistics

The E.U.’s General Data Protection Regulation (GDPR) violations are growing more expensive, and not just for the largest tech companies. In 2021, European regulators tripled their total fine amounts for violations of the landmark data privacy law over the prior year, according to two recent quantitative reviews of enforcement. The statistics compiled by Cooley and DLA Piper tally the most common violations under the law, revealing European data protection authorities share concerns about transparency and the legitimacy of companies’ processing, but differ in their approach to punishment and sanctions. With insights from the reports’ authors at DLA Piper and Cooley, this article discusses the findings, interpretations of the trends and GDPR compliance consequences. It also includes comments made during a Cooley webinar. See our two-part series on the GDPR: “Impact” (Feb. 21, 2019); and “Compliance” (Feb. 28, 2019).