The phenomenal rise in the price of bitcoin during the course of this year mirrors the extraordinary amount of enquiries (and subsequent instructions) that our team has received in relation to the formation of cryptocurrency funds and digital token launches.
As cryptocurrencies and digital tokens continue their aggressive push into the mainstream investment world, regulators and lawyers worldwide are grappling with how to fit this square peg of digital assets into the round hole of the existing legal and regulatory framework. As a result, this is one of the most exciting (and, if I am honest, slightly scary) times in my legal career and my day-to-day mindset amusingly mirrors the extraordinary fluctuation in the price of most of the cryptocurrencies this week. I know my colleague Oliver Bell will be blogging about this next week and so for now, I’ll focus on one of the narrower areas our team has been trying to get its collective head around.
I’m sorry if I got anyone’s hopes up with the title to this post. Unfortunately, this is not going to give fund managers magical insights on how to secure that crucial investment to launch a fund or take an existing fund to the next level. However, this post may help keep some fund managers out of trouble!
I am often approached by clients and contacts with queries about the marketing of their fund interests internationally. This may be because my business cards and email signature state that I am a “Practitioner of Foreign Law” – perhaps people think I am able to advise on the laws of every “foreign” jurisdiction!
The bad news for people with such queries is that I am usually not qualified to answer specific queries on marketing in particular jurisdictions – I only practice Cayman and BVI law. However, the good news is twofold:
1. Asking these types of questions is the right thing to do! All our fund manager clients are (hopefully) aware of the various laws, regulations and rules that govern marketing fund interests in their home country. What every fund manager should also know is that they need to tread very carefully when marketing fund interests overseas. My fellow Offshore Funds Bloggers have written some useful posts on the European Union’s Alternative Investment Fund Managers Directive here and here. Although the funds marketing regime in Europe can be considered one of the most stringent in the world, it is worth remembering that almost every other jurisdiction will have laws and regulations on how (and to whom) fund interests may be marketed there. For example, managers in the United States will be very familiar with the careful planning needed to ensure that their funds fall within the various exemptions and safe harbours of the Securities Act and Investment Companies Act (not to mention state-by-state blue sky filing requirements!). Continue reading
Greetings offshorefundsblog readers. Phil and I have just returned from attending the inaugural Cap Intro West Conference in San Francisco last week. We were both honoured to be invited to speak at the conference: I joined a number of friends presenting a Private Equity and Hedge Fund Boot Camp for start up and emerging fund managers while Phil, somehow, managed to have the audience in stitches while he detailed the ins and outs of AIFMD on his panel on Navigating Fund Marketing Rules and Regulations.
As you might expect at a January conference, a lot of time was spent during the breakouts looking at the tea leaves to determine what 2017 might hold for us. I am very pleased to report that the mood was generally optimistic. Some of this may have due to the Trump administration’s intended policies to boost the US economy and some of this may have been due to the generous pours of the bar staff at the evening cocktails!
I am very pleased to be the first offshore funds blogger to give a shout out to our friends and colleagues at harneysoffshorelitigation.com.* All the very best with the launch of the blog! The team here at Harneys offshorefundsblog are extremely proud to be your guiding light and inspiration, your blogging mentors, as you take your first stuttering baby steps towards true blogging greatness. Congratulations on being the first blog devoted to the world of offshore litigation (and, ahem, the second blog devoted to offshore legal matters).
In all seriousness, we are very excited that there will be a blog devoted to offshore litigation matters now. The offshorefundsblog bloggers worked very closely with our litigation colleagues during the GFC helping some of our investment funds clients deal with distressed situations, whether as a result of trading losses, illiquidity or other factors. Together, we were able to find solutions for those clients that I don’t think a funds lawyer or a litigation lawyer would have been able to come up with alone.
Once they are up on their feet, Phil and I very much hope that the young upstarts at harneysoffshorelitigation.com will be able to provide a few guest posts for our discerning readership as well!
* I think I am almost as proud to be the first offshore lawyer to actually give a shout out on a blog. Keeping up with those hip young millennial bloggers for sure…
As many of you are aware, there is an increased regulatory and investor focus on cybersecurity in the funds space (just last week the Cayman regulator issued this circular). In this guest post, my friend Erik Kellogg discusses one of the key cybersecurity issues that start up and emerging managers should address.
It's a tough job, but someone has to do it….
Lewis Chong (left) and other summit attendees engaged in an intense discussion on the impact of the Common Reporting Standard on offshore funds.
Harneys was recently offered a fantastic speaking and sponsorship opportunity by the organisers of the 2015 Alternative Asset Summit in Las Vegas. Although I was perfectly happy to spend my time huddled at a desk in the damp cold, climes of Vancouver, I was strong-armed by my partners into attending. It’s a rough life – last week I was forced to head to sunny Las Vegas, stay at the Wynn hotel and sip cocktails at the poolside cabanas with esteemed colleagues in the alternative assets industry.
Before you get the mistaken impression that these Las Vegas conferences are a complete boondoggle, let me assure everyone (especially my partners) that plenty of high level discussions took place. I was honoured to be invited to be a panellist at the Hedge Fund Boot Camp the day before the Summit started. I joined some leading industry experts on panels focused on all aspects of starting and building a successful hedge fund. Start-up funds are a core part of our funds formation practice and this was an excellent opportunity to assist a number of people interested in starting a fund.
I was also fortunate enough to be asked to host a small Q&A lunchtime session on starting up an offshore fund. It was a great chance to answer some of the more detailed offshore fund questions that people may not have felt comfortable asking at the Boot Camp.
Although there were plenty of fascinating panels at the Summit, one subject that particularly interested me was the increased focus, from both an external (regulator) perspective and an internal (industry) perspective, on cyber security. This reflects my personal experience as well – I am sure I am not alone in saying that I now receive requests from clients on a regular basis to confirm the security policies and procedures of our law firm. This focus on cyber security is being driven by investors in our clients’ funds as part of their due diligence process and by our clients themselves. We are also seeing hedge fund focussed cyber security start ups enter the space as well. This is very much a live issue heading into 2016.
As a funds lawyer practicing both Cayman and BVI law, I am often asked by start-up managers and their onshore lawyers which jurisdiction is preferable.
Like the photographs here, the two jurisdictions may appear identical at first. After all, Cayman and the BVI are both excellent and highly regarded offshore fund jurisdictions. We have long-standing clients who elected to use one or the other for different and highly sensible reasons at the time of their first launch. But there are differences, and a number of our largest clients actually have fund vehicles in both jurisdictions to maximize the advantages that they each offer.
(And if you are curious which photo is which, read on to the end of this post.)
For a manager looking to establish their first offshore fund vehicle, choosing between jurisdictions will depend on their specific requirements. On that basis, I ask managers the following questions to help identify the best jurisdiction for them: Continue reading