Whilst the involvement of major industry-leading litigation funders is widely publicized, outside of these household names are a wide range of investment firms that are keen to take part in a sector which promises lucrative returns for those willing to accept the high levels of risk. A new ruling from the Securities and Exchange Commission (SEC) means that whilst private equity firms may still not publicly discuss these investments, they will now be required to privately disclose their litigation finance activities.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
Whilst the involvement of major industry-leading litigation funders is widely publicized, outside of these household names are a wide range of investment firms that are keen to take part in a sector which promises lucrative returns for those willing to accept the high levels of risk. A new ruling from the Securities and Exchange Commission (SEC) means that whilst private equity firms may still not publicly discuss these investments, they will now be required to privately disclose their litigation finance activities.
Reporting by Bloomberg Law details the results of a vote by the SEC earlier this week, which approved new rules governing required disclosures by private equity firms. These companies had previously been able to avoid making disclosures about litigation finance investments, but will now be required to privately report to the SEC ‘the percentage of their capital targeted for use by law firms as part of an investment strategy’.
The article also covers additional plans to increase reporting of litigation funding activity by private funds, as the SEC is working to finalize rules that would also require hedge funds to confidentially disclose the proportion of litigation finance in the total value of their assets. The current plans would see hedge funds make this disclosure using a net asset value calculation, and would allow them to report using the percentage of the firm’s capital that is allocated to litigation funding.
