Armageddon or Salvation? Who knows! But everybody’s using AI all of a sudden, including fund managers in a variety of novel and interesting ways. Listen up for a handful of questions/observations from my recent experience. Mostly, make sure you’re thinking through the implications of any new technology you’re using. 

Key Points From This Episode:

• Best and worst use cases for various AI technologies.
• Robots hallucinating.
• Trust, but verify.
• Understand confidentiality and security issues, and be wary about sharing sensitive information with robots.
• Should you replace me with a robot?

Disclaimer:

This show is for informational purposes only. Nothing presented here constitutes legal advice. Tokens of Wisdom is produced by Dave Rothschild, partner at Cole-Frieman & Mallon LLP headquartered in San Francisco, California. For more information, visit https://colefrieman.com/

Links Mentioned in Today’s Episode:

Dave Rothschild - https://www.linkedin.com/in/davidcrothschild/

Cole-Frieman & Mallon LLP - https://colefrieman.com/

Music by Joe Ginsberg - https://www.instagram.com/thejoeginsberg

For any questions or comments, email: [email protected]

SEC vs Binance on Monday. SEC vs Coinbase on Tuesday. What a week! 

The gloves are officially off, and the SEC is coming hard after the crypto titans. What does it all mean? You’ve come to the right place.

Key Points From This Episode:

• Similarities (unregistered offerings galore!) and differences (fraud!) between the Binance and Coinbase allegations.
• Why the allegations against Coinbase seem particularly disingenuous.
• Why if you try hard enough, everything fails the Howey Test.
• A glass-half-full conclusion (I am an eternal optimist after all).

Disclaimer:

This show is for informational purposes only. Nothing presented here constitutes legal advice. Tokens of Wisdom is produced by Dave Rothschild, partner at Cole-Frieman & Mallon LLP headquartered in San Francisco, California. For more information, visit https://colefrieman.com/

Links Mentioned in Today’s Episode:

Dave Rothschild - https://www.linkedin.com/in/davidcrothschild/

Cole-Frieman & Mallon LLP - https://colefrieman.com/

SEC vs Binance Complaint - https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-101.pdf

SEC vs Coinbase Complaint - https://www.sec.gov/litigation/complaints/2023/comp-pr2023-102.pdf

Paradigm Articles - https://policy.paradigm.xyz/writing/secs-path-to-registration-part-i

Music by Joe Ginsberg - https://www.instagram.com/thejoeginsberg

For any questions or comments, email: [email protected]

Today’s show is all about decentralized autonomous organizations…DAOs! What are they? How do they work? Why you should probably learn the answers to the two prior questions before listening to this.

Key Points From This Episode:

• High-level overview of the concept of a DAO.
• Dave’s Top 5 issues for fund managers to consider before touching DAO tokens with fund assets:
  • Liability;
  • Regulatory;
  • Governance;
  • Security; and
  • Disclosure.

Disclaimer:

This show is for informational purposes only. Nothing presented here constitutes legal advice. Tokens of Wisdom is produced by Dave Rothschild, partner at Cole-Frieman & Mallon LLP headquartered in San Francisco, California. For more information, visit https://colefrieman.com/

Links Mentioned in Today’s Episode:

Dave Rothschild - https://www.linkedin.com/in/davidcrothschild/

Cole-Frieman & Mallon LLP - https://colefrieman.com/

Ooki DAO - https://www.cftc.gov/PressRoom/PressReleases/8590-22

The DAO - https://www.coindesk.com/learn/understanding-the-dao-attack/

Music by Joe Ginsberg - https://www.instagram.com/thejoeginsberg

For any questions or comments, email: [email protected]

We have a super-sized episode for you today, and it’s different from our usual fare in more than just length. Last week, I invited Fizza Khan - CEO of Silver Regulatory Associates; Mike Fitzgerald – Managing Director and Global Head of Cap Intro at TD Cowen; and Malhar Oza – Senior Associate at CFM to join me for an in-person event discussing the SEC’s marketing rule. This episode is a lightly edited recording of that conversation.

Key Points From This Episode:

• The new marketing rule consolidates two prior SEC rules and myriad SEC guidance from multiple decades.
• The new rule has been in full force and effect for six months, and managers have many questions about how to comply.
• The final rule release is 430 pages long, and if it could be distilled down into two words, they would be: “don’t mislead”.
• Why exempt advisers should comply with it too, even though it only technically applies to registered investment advisers.
• Social media considerations for fund managers.
• Why you need to net fees and expenses out of performance results in marketing materials.
• Issues around substantiation.

Disclaimer:

This show is for informational purposes only. Nothing presented here constitutes legal advice. Tokens of Wisdom is produced by Dave Rothschild, partner at Cole-Frieman & Mallon LLP headquartered in San Francisco, California. For more information, visit https://colefrieman.com/

Links Mentioned in Today’s Episode:

Dave Rothschild - https://www.linkedin.com/in/davidcrothschild/

Fizza Khan - https://www.linkedin.com/in/fizzakhan1/

Mike Fitzgerald - https://www.linkedin.com/in/michael-fitzgerald-bb2b4572/

Malhar Oza - https://www.linkedin.com/in/malharoza/

Cole-Frieman & Mallon LLP - https://colefrieman.com/

Music by Joe Ginsberg - https://www.instagram.com/thejoeginsberg

For any questions or comments, email: [email protected]

In a less-than-stellar fundraising environment, some aspiring fund managers want to dip their toe into the fund waters by forming an SPV to invest in one high-conviction idea. An SPV in this context is just a “mini fund” - it’s an investment vehicle formed by a manager to pool capital from outside investors to make (usually) a single investment. 

Key Points From This Episode:

• Different ways in which people use the term “SPV”.
• Flashback to the Legislative Triangle from Episode 1 and why the kinds of SPVs we’re discussing today need to comply with all three sides.
• Why an SPV like this can often be launched faster and cheaper than a more complex fund vehicle.
• High-level legal cost breakdown on fund formation vs SPV formation, and the different buckets of cost you’re likely to incur.

Disclaimer:

This show is for informational purposes only. Nothing presented here constitutes legal advice. Tokens of Wisdom is produced by Dave Rothschild, partner at Cole-Frieman & Mallon LLP headquartered in San Francisco, California. For more information, visit https://colefrieman.com/

Links Mentioned in Today’s Episode:

Dave Rothschild - https://www.linkedin.com/in/davidcrothschild/

Cole-Frieman & Mallon LLP - https://colefrieman.com/

Music by Joe Ginsberg - https://www.instagram.com/thejoeginsberg

For any questions or comments, email: [email protected]

In a less-than-stellar fundraising environment, many aspiring fund managers want to dip their toe into the fund waters, without incurring the expense of a full fund offering. This is where an incubator fund might make sense, and that’s the topic of today’s episode. An incubator fund allows an aspiring manager to test an investment strategy and develop a track record that can eventually be marketed to outside investors.

Key Points From This Episode:

• My definition of an incubator fund, and how it differs from another common definition.
• Flashback to the Legislative Triangle from Episode 1 and the four prongs of the Howey Test from Episode 2.
• Why a true incubator fund cuts corners off the Legislative Triangle.
• Limitations of an incubator fund (no outside investors, no compensation).

Disclaimer:

This show is for informational purposes only. Nothing presented here constitutes legal advice. Tokens of Wisdom is produced by Dave Rothschild, partner at Cole-Frieman & Mallon LLP headquartered in San Francisco, California. For more information, visit https://colefrieman.com/

Links Mentioned in Today’s Episode:

Dave Rothschild - https://www.linkedin.com/in/davidcrothschild/

Cole-Frieman & Mallon LLP - https://colefrieman.com/

Music by Joe Ginsberg - https://www.instagram.com/thejoeginsberg

For any questions or comments, email: [email protected]

Unfortunately, we have occasion for a topical episode today given all the news about bank failures and bank runs over the last week. In today’s episode we discuss a handful of front of mind considerations for fund managers navigating a world in which bank runs seem more plausible.

Key Points From This Episode:

• Diversify banking relationships.
• Stay informed.
• Do not commingle assets.
• Beware of scams.
• Plan for funding interruptions.
• Seek advice of legal counsel. 

Disclaimer:

This show is for informational purposes only. Nothing presented here constitutes legal advice. Tokens of Wisdom is produced by Dave Rothschild, partner at Cole-Frieman & Mallon LLP headquartered in San Francisco, California. For more information, visit https://colefrieman.com/

Links Mentioned in Today’s Episode:

Dave Rothschild - https://www.linkedin.com/in/davidcrothschild/

Cole-Frieman & Mallon LLP - https://colefrieman.com/

Music by Joe Ginsberg - https://www.instagram.com/thejoeginsberg

For any questions or comments, email: [email protected]

Today we are diving into the SEC’s existing “Custody Rule”, and its recent proposal to update and replace the Custody Rule with a new “Safeguarding Rule”. The Custody Rule applies to registered investment advisers that have custody of client assets. The newly proposed Safeguarding Rule would apply similarly but make important and specific updates and changes, notably among them, applying the rule explicitly to digital assets (and other client assets). It’s important to remember that as of now, the Safeguarding Rule is only a proposal, not an actual rule.

Key Points From This Episode:

• Understanding the definition of “custody” and the contours of the Custody Rule.
• Analyzing the ambiguities in applying the Custody Rule to digital asset fund managers.
• Summarizing key pieces of the proposed Safeguarding Rule.
• How the proposed Safeguarding Rule, if implemented in its current form, might impact crypto as an asset class.
• What steps must occur before the proposal can become an actual rule.
• Appreciating the proposal’s departure from “regulation by enforcement”. 

Disclaimer:

This show is for informational purposes only. Nothing presented here constitutes legal advice. Tokens of Wisdom is produced by Dave Rothschild, partner at Cole-Frieman & Mallon LLP headquartered in San Francisco, California. For more information, visit https://colefrieman.com/

Links Mentioned in Today’s Episode:

SEC Release Regarding Proposed Safeguarding Rule - https://www.sec.gov/rules/proposed/2023/ia-6240.pdf

SEC Commissioner Hester Peirce Statement on Safeguarding Rule Proposal - https://www.sec.gov/news/statement/peirce-statement-custody-021523

SEC Commissioner Mark Uyeda Statement on Safeguarding Rule Proposal - https://www.sec.gov/news/statement/uyeda-statement-custody-021523

Dave Rothschild - https://www.linkedin.com/in/davidcrothschild/

Cole-Frieman & Mallon LLP - https://colefrieman.com/

Music by Joe Ginsberg - https://www.instagram.com/thejoeginsberg

For any questions or comments, email: [email protected]

Today we are talking about how to structure your new fund vehicle, starting with two crucial questions you need to answer before making any structuring determinations: 1) what is your fund investing in? and 2) Who is investing in your fund?

Key Points From This Episode:

• Making sense of the myriad names for private funds: hedge fund, venture capital fund, private equity fund, evergreen fund, open-ended fund, closed-ended fund, etc.
• Why people confuse venture capital funds and private equity funds and how they differ.
• The basic structure for a fund vehicle for a U.S. fund manager.
• How to accommodate non-U.S. investors or tax-exempt U.S. investors participating in your fund.
• The difference between a full master-feeder fund and a mini-master feeder fund. 

Disclaimer:

This show is for informational purposes only. Nothing presented here constitutes legal advice. Tokens of Wisdom is produced by Dave Rothschild, partner at Cole-Frieman & Mallon LLP headquartered in San Francisco, California. For more information, visit https://colefrieman.com/

Links Mentioned in Today’s Episode:

Episode 8: No U.S. Persons Allowed! - https://player.fm/series/tokens-of-wisdom/episode-8-no-us-persons-allowed 

Dave Rothschild - https://www.linkedin.com/in/davidcrothschild/

Cole-Frieman & Mallon LLP - https://colefrieman.com/

Music by Joe Ginsberg - https://www.instagram.com/thejoeginsberg

For any questions or comments, email: [email protected]

One of the top questions I get from aspiring digital asset fund managers is: How do I access non-US exchanges or token projects that bar US person participation? Unfortunately, the unsatisfying answer is: it depends! 

There are myriad potential solutions to this problem, but the extent to which any of them might work for you depends on many factors.

Key Points From This Episode: 

• Why certain non-US market participants do not want US Person investors.
• How they use different definitions of “US Person”.
• Why reading the fine print is critical.
• Potential structuring solutions.
• Why making false representations is always a bad idea.
• An introduction to counterparty risk.

Disclaimer:

This show is for informational purposes only. Nothing presented here constitutes legal advice. Tokens of Wisdom is produced by Dave Rothschild, partner at Cole-Frieman & Mallon LLP headquartered in San Francisco, California. For more information, visit https://colefrieman.com/

Links Mentioned in Today’s Episode:

Dave Rothschild - https://www.linkedin.com/in/davidcrothschild/

Cole-Frieman & Mallon LLP - https://colefrieman.com/

Music by Joe Ginsberg - https://www.instagram.com/thejoeginsberg

For any questions or comments, email: [email protected]