Pastore’s Managing Partner Leads Discussion with Congressman Jim Himes

On September 23, the Connecticut Crypto Forum (the “Forum”) held an event at the University of Connecticut at Stamford. The Forum connects large and sophisticated capital pools with leading players and thinkers across the crypto, defi and Web 3.0 markets to strengthen investor knowledge, understanding and skill. Pastore LLC is proudly a Founder and Sponsor of the Connecticut Crypto Forum. The Forum’s September 23 event was an invite-only session.

In the first half of the event, a panel of speakers discussed the current maturity of the crypto and blockchain markets.  The panel addressed the current challenges facing the evolving asset class and concluded that crypto/blockchain assets are still “metaphorically” in their teenage years. The asset class still is characterized by volatility. Moreover, the panelists noted the time of hyper valuation of projects in the industry is over. What follows now is a time of acquisitions. Many companies and projects will likely fail, but the ones with worthwhile technology that lack sufficient cashflows to continue operation will likely be consolidated within larger players and ultimately be poised to make the industry more efficient. However, the panelists agreed that the industry’s best days are ahead of it.

During the second half of the event, Pastore LLC’s Managing Partner, Christopher Kelly, led a discussion with Congressman Jim Himes, an emerging leader in the crypto/blockchain industry on Capitol Hill. Congressman Himes noted the significant attention that crypto and blockchain assets have received in Congress. He noted that he is working with other members of Congress on legislation concerning the industry.

When a member of the crowd asked what should businesses do considering the lack of legal and regulatory clarity surrounding crypto assets, Mr. Kelly gave a poignant response: Don’t be afraid, be transparent and work with counsel to navigate the murky regulatory waters. Pastore, as a thought leader in the field, is positioned to help businesses and individuals plan a path forward despite the uncertainty.

 

Pastore LLC Welcomes Senior Counsel and Summer Class

On Tuesday, May 31st, Pastore LLC welcomed senior counsel and our summer class to the firm.

Pastore LLC is pleased to welcome Robert Knight as Senior Counsel. Mr. Knight has a wide range of legal experience. Bob was an elected official Municipal Judge serving two four-year terms. Indiana US Senator Richard Lugar, then Mayor of Indianapolis, administered his Oath of Office on each occasion he was elected to office. As Claim Counsel for Aetna Property and Casualty Company, Bob managed national litigation supervising hundreds of trial lawyers and thousands of lawsuits.  Bob also as Federal Regulatory Affairs Counsel company spokesperson before federal agencies concerning matters of insurance. As Environmental Coverage Counsel for The Hartford Insurance Company, Bob assisted in structuring the settlement of two five billion dollar aquifer contamination claims. As Special Counsel to Abbott Labs, Bob worked with the principal scientist inventor of Humira documenting patent royalty agreements antecedent to a multibillion Humira patent royalty dispute with Cambridge Antigen Associates in England, co- developer of Humira. Bob is rated a Martindale Hubbell AV Preeminet lawyer where he is ranked in the top 5% of lawyers and American Registry where he is ranked in the top 1% of lawyers in legal ability and ethical standards.

Rachel Neff has returned to office as our Summer Associate. She worked with Pastore as a Law Clerk since September of 2021. She took a break for her finals, a trip home to California, and some time off to enjoy some hiking at our National Parks. She will be full time for the summer.

Stewart Stockdale Jr. joined us as our full time Summer Law Clerk. He completed his first year of law school at the Indiana Maurer School of Law. He graduated from Tufts University in 2019. He spent the two years prior to law school working at Merrill Lynch in White Plains.

Christopher Atuahene joined us as our Summer Law Clerk. Chris completed his first year of law school at New York Law School. He graduated from Southern Connecticut State University in 2020 with a Bachelor’s degree in Philosophy.

Pastore has LLC also welcomed Dan Melillo, as our Summer Law Intern. He finished his Junior year at Skidmore College as a Political Science major with an Education Minor. Dan looks forward to going to Law School upon graduation.

Pastore Sponsors Connecticut Crypto Forum

The Connecticut Crypto Forum has recently been created to advance education and knowledge in this new asset class. The forum will connect large and sophisticated capital pools with leading players and thinkers across the crypto, delfi, and Web 3.0 market to strengthen investor knowledge, understanding, and skill. The mission of the forum is to build a diverse, sophisticated, Connecticut-based community interested in crypto from many angles.

On May 13, 2022, the Connecticut Crypto Forum will be conducting an invite-only session for those interested in the forum to partake in. Pastore LLC is proudly a founder and sponsor of the Connecticut Crypto Forum.

Learn more about Pastore’s Crypto practice

 

 

 

Pastore Calculates RAUM of over $1 Billion for Registered Investment Advisor

This past month, Pastore LLC assisted a registered investment advisor (RIA) with the filing of its Form ADV.  In connection therewith the firm assisted the RIA in its calculation of regulated assets under management (RAUM), which totaled over $1 billion. The Securities and Exchange Commission (SEC) uses RAUM as its  measurement of assets for registration purposes. However, RAUM has  sometimes been misunderstood as representing total assets under management (AUM) for a company, and based on the firm’s experience the SEC itself has sometimes confused RAUM with AUM.  RAUM does not include every type of asset that an RIA may manage, and in particular may not include certain real estate investments or investments in portfolio companies controlled by the fund.  When assessing the financial condition of an RIA and its funds, it is important to distinguish between the assets counted under RAUM and the assets counted under AUM.  An RIA that appears to manage a small volume of assets based on its RAUM may in fact manage a much larger volume of assets based on total AUM.

Pastore Files Appeal in New York’s First Department Appellate Division

Recently, Pastore LLC perfected its appeal in New York’s First Department Appellate Division. Pastore LLC represents a celebrity chef in the matter, which involves a contract dispute dealing with election of remedies issues. The chef is well known and has high-end restaurants in New York and Las Vegas, and the issue in the case involves some of his historical publicity. Ultimately, the matter involves sophisticated contractual provisions, and thus the chef hired Pastore LLC to handle these contractual agreements.

Congratulations to Joseph M. Pastore III, Recipient of the 2022 AV Preeminent Rating Award

Pastore LLC proudly announces that for the 12th consecutive year, Martindale-Avvo has awarded the 2022 AV Preeminent Rating to Managing Partner, Joseph M. Pastore III. This honor is the highest possible rating in both legal ability, and ethical standards a practicing attorney can receive. Mr. Pastore has received this honorable award resulting from his dedication to ethical practices, work ethic, and legal abilities he commits to each day as a practicing attorney.

Second Circuit Affirms Jury Verdict Win for Pastore’s Hedge Fund Clients

The Second Circuit Affirms Jury Verdict Win for Pastore’s Hedge Fund Clients in Multimillion-dollar Securities Fraud Case Brought by Billionaire Family Office

On November 15, 2021, the Second Circuit affirmed a jury verdict obtained by Pastore in a federal securities fraud case. This concluded a contentious, multi-year litigation, defeating claims of fraudulent inducement and securities fraud brought against two hedge fund executives by a billionaire family office special purpose investment vehicle. The billionaire family office, the heirs to and founders of a well-known apparel store, had invested in the fund’s General Partner limited liability company.

In 2018, The United States District Court for the District of Connecticut granted a summary judgment in favor of the defendants. The summary judgment was subsequently appealed up to the United States Court of Appeals for the Second Circuit, before being remanded back to, and concluding with, a jury trial in the United States District Court for the District of Connecticut. Pastore LLC was hired for the trial. After two weeks of evidence and 7 hours of jury deliberation, Pastore LLC was able to secure a favorable jury verdict for the clients. The jury had found in favor of the defense on a federal securities claim.

Then, the billionaire family office appealed the jury verdict to the Second Circuit and argued that it was entitled to a new trial because, it alleged, the district court’s abuse of discretion had a prejudicial impact on the jury’s verdict. Among other alleged errors, the billionaire family office alleged that evidence concerning a billion-dollar company investment agreement with one of the world’s largest private equity funds should be excluded. The Second Circuit stated, “the district court instructed the jury ‘the entity that holds an interest in a security suffers an economic loss if the investment experiences a decline in value.’ App’x 559. In other words, the district court instructed the jury that it should find that…suffered an economic loss if it determined that…owned the investment interest in…, regardless of the source of investment funds, and that this investment declined in value.”

Pastore & Dailey rebrands as Pastore

Dear Clients and Friends:

I am pleased to announce that Pastore & Dailey LLC will now be known as Pastore LLC.

After nine years of dedication to our clients’ success, our friend and colleague Bill Dailey will shift his focus toward an independent practice, while continuing to support Pastore clients when needed. Furthermore, I am pleased that Christopher Kelly will assume a new role as Managing Partner, allowing me to spend more time on our client matters.

Along with our name change, we have launched a new, modern brand identity and website that are consistent with our mission to provide “AMLAW 100” quality service to clients.

Over the last two years, we have added attorneys from Paul Weiss, Skadden Arps, McDermott Will, Proskauer Rose, Kelley Drye and KL Gates. We have senior attorneys from Yale Law School and the University of Virginia and have hired many top-flight junior attorneys from the best regional law schools. Our alumni include the Lt. Governor of the State of Connecticut and attorneys who served in-house at top financial institutions. We handle matters from New York to L.A. and around the world. We work on billion-dollar transactions and cases that receive national attention.

We strive to provide big firm quality, without the conflicts and related big firm insensitivity to cost and results. Please see our new website at pastore.net. We hope that you have stayed safe during these challenging times, and like us, look forward to a return to normalcy at home and at work.

Sincerely,

Joseph M. Pastore III

Regulatory Assets Under Management Are Not Always All Assets Under Management

A daunting question that Registered Investment Advisers face in formulating their amended and annual form ADV 1 and ADV 2 (Brochure) submissions as required under the Investment Advisors act of 1940 is determining what the components of regulatory assets under management (“RAUM”) are, and providing adequate disclosure to the Securities and Exchange Commission (“SEC”) as to how and why the RAUM of some investment advisors is much less than the actual value of monies or investment vehicles managed.

Assets under management, or AUM, is a general term used throughout the financial industry that can be defined by many standards. AUM represents “investors’ equity” (like shareholders’ equity) and is an accurate representation of investors’ capital at risk (i.e., the amount of money that investors have invested in a manager’s fund(s))[1].  RAUM specifically refers to Regulatory AUM, which the SEC’s standard form of AUM[2].  The SEC developed this metric to have a consistent internal measurement, implementing a mandatory tiered registration of private investment advisers[3].  RAUM is the sum of the market value for all the investments managed by a fund or family of funds that a venture capital firm, brokerage company, or an individual registered investment advisor or portfolio manager manages on behalf of its clients[4].

In determining RAUM, the SEC specifically states that “In determining the amount of your regulatory assets under management, include the securities portfolios for which you provide continuous and regular supervisory or management services as of the date of filing the Form ADV[5].”  An account that a client maintains with a registered investment advisor is considered a securities portfolio if at least 50% of the total value of the assets held in the account consists of securities[6]. For purposes of this test, an investment advisor may treat cash and cash equivalents (i.e., bank deposits, certificates of deposit, bankers’ acceptances, and similar instruments) as securities[7].  The SEC also requires that you must include securities portfolios that are family or proprietary accounts, accounts for which no compensation for services is received, and accounts of clients who are not United States persons[8].

The SEC notes that “[f]or purposes of this definition, treat all of the assets of a private fund as a securities portfolio, regardless of the nature of such assets[9].”  The SEC does advise, however, that assets either the under management by another person or entity or assets that consists of real estate or businesses whose operations you “manage” on behalf of a client but not as an investment are excluded from the RAUM calculation[10].

RAUM also requires that supervision of these accounts be “continuous and regular.”  This term is defined by the SEC in two ways.  The advisor must have either discretionary authority over investments and provide on-going supervisory or management services, or, if they do not have discretionary authority over the account, they must have on-going responsibility to select or make recommendations based upon the needs of the client, as to specific securities or other investments the account may purchase and sell[11].  If such recommendations are accepted by the client, then the adviser is responsible for arranging or effecting the purchase or sale and satisfies the definition of “continuous and regular[12]”.

The SEC also uses three separate factors to determine whether supervision of assets is “continuous and regular.” The first factor is whether there was an advisory contract in place between the parties.   If the investment advisor agrees in an advisory contract to provide ongoing management services, this suggests that you provide these services for the account[13]. Other provisions in the contract, or the actual management practices, however, may suggest otherwise.  The second factor is the form of compensation received[14]. If the advisor is compensated based on the average value of the client’s assets managed over a specified period, this suggests that the advisor provides continuous and regular supervisory or management services for the account[15].  The third factor is the extent to which the assets are actively managed or whether advice is regularly provided to the client[16]. Note that no single factor is determinative, and the specific circumstances should be viewed in their entirety[17].

In summation, AUM is a method used to compute the total market value of investments that are managed by registered investment advisors on behalf of clients. RAUM is the SEC’s regulatory from of AUM. RAUM consists of the accounts that are made up of 50% or more of securities that are continuously and regularly managed by the registered investment advisor overseeing the facilitation and management of the client’s accounts.

[1] “Assets Under Management,” Investopedia, https://www.investopedia.com/terms/a/aum.asp, accessed February 5, 2021.
[2] Form ADV Instructions, https://www.sec.gov/about/forms/formadv-instructions.pdf, accessed February 5, 2021.
[3] Id.
[4] “Assets Under Management,” Investopedia, accessed February 5, 2021.
[5] Form ADV Instructions, accessed February 5, 2021.
[6] Id.
[7] Id.
[8] Id.
[9] Id.
[10] Id.
[11] Calculating Regulatory Assets Under Management – Wagner Law Group, https://www.wagnerlawgroup.com/resources/investment/calculating-regulatory-assets-under-management, accessed February 5, 2021.
[12] Id.
[13] Form ADV Instructions, accessed February 5, 2021.
[14] Id.
[15] Id.
[16] Id.
[17] Id.