K&L Gates’ derivatives and structured products practice is a substantial part of our general financial services, investment management and regulatory enforcement practices.  We regularly advise investment management and other end-user clients with respect to the full range of over-the-counter (“OTC”) derivatives (e.g., credit, equity, interest rate, currency, and energy swaps, options, currency forwards, repos and synthetic investments).  Our counseling covers derivatives structuring, negotiation and trading, regulatory compliance and other issues.  Our end-user clients include hedge funds, registered investment companies, ERISA and government plans, U.S. and non-U.S. corporations, asset managers, energy marketers, utilities and other market participants.

We capitalize on our institutional knowledge and achieve efficiencies for the benefit of clients by establishing multidisciplinary teams of practitioners in securities, tax, broker-dealer, securitization, bankruptcy, bank regulatory, structured products, ERISA, distressed debt, securities lending, repurchase and reverse-repurchase transactions and investment management.  By leveraging our expertise, we can provide added value and significant cost savings as compared to other firms, whose financial services practices may lack our breadth and depth.

Transactional Advice
We advise hedge funds, registered investment companies, retirement plans, investment advisers, U.S. and non-U.S. corporations, special purpose entities, REITs, brokerage firms, other financial institutions, energy companies and utilities on the documentation and regulatory and compliance issues relating to their use of derivative instruments, including swaps, caps, floors, collars, futures contracts and options. 

We regularly represent a large number of end-users in drafting, negotiating, renegotiating and interpreting a large number of repurchase, reverse repurchase and securities lending agreements, as well as master securities forward transaction agreements.  We also regularly represent our clients with respect to securities lending and securities lending agency activities, and we draft and negotiate on their behalf related documentation.  K&L Gates also advises financial institution clients in connection with transactional and securities and other regulatory issues arising in connection with a variety of structured products and synthetic investments.

We also determine whether firms may be exempt from registration as commodity pool operators (“CPOs”) and commodity trading advisors (“CTAs”) with the Commodity Futures Trading Commission (“CFTC”) and the National Futures Association (“NFA”), register firms as CPOs, CTAs, futures commission merchants and introducing brokers, and advise them on CFTC and NFA disclosure, reporting and record-keeping requirements.  We regularly review account agreements between registered investment companies and private funds (including procedural and record-keeping agreements), ERISA plans and other clients and futures commission merchants or broker-dealers regarding the trading of futures contracts and options, and prepare supervisory and internal liability control policies and procedures regarding futures and options advice and trading.

Regulatory Inspections, Investigations and Enforcement
We have an extensive practice in representing clients in SEC, CFTC, NASD, NYSE, NFA and state regulatory inspections, audits, and enforcement investigations and actions, including those focused on OTC derivative products and sales.  More than 35 of our lawyers devote substantially all of their time to such matters, giving us substantial institutional knowledge and expertise in this area.  This practice has included representation of, among others, hedge funds, registered investment companies, investment advisers, CTAs, energy companies and traders in regulatory inspections/investigations with respect to the creation, investment in, sale of and/or trading of both OTC and exchange-traded derivatives.  We also regularly perform confidential, internal compliance reviews and, when necessary, internal investigations in these areas and provide in-house training on legal standards governing the sale and trading of derivatives.

Representative engagements include:

• Representing end-users in the preparation, negotiation, and execution of many hundreds of master agreements and related documentation covering swaps, options and forward transactions on a full range of underlying assets and indices;
  
  
• Advising clients in structured transactions involving total return swaps on underlying equity securities and fixed income obligations;
  
  
• Negotiating domestic and international securities lending program documentation and advising as to related structuring and regulatory compliance issues;
  
  
• Preparing, negotiating and reviewing nonstandard equity derivatives documentation, including variable-delivery forward transactions;
  
  
• Preparing, negotiating and reviewing documentation for credit default swaps and related structured products and advising on the interpretation and performance of credit derivatives contracts;
  
  
• Representing the equity investor in the structuring and execution of a synthetic investment in a large synthetic CDO, and representing an investment manager in the process of structuring similar transactions;
  
  
• Representing the sponsor of a synthetic, principal-protected, SEC-registered fund of hedge funds;
  
  
• Representing the sponsor of a privately-placed, principal-protected, structured investment in a fund of hedge funds and managed futures product;
  
  
• Representing the main participants in U.S. and cross-border hedge-fund linked structured products, including fund of hedge funds managers, investors and swap counterparties;
  
  
• Representing a Federal Home Loan Bank in the structuring of a certificate of deposit program under which the returns on the CDs were predominantly based on changes in the S&P 500 Index;
  
  
• Assisting several public companies in the design and execution of their issuances of debt instruments having embedded derivatives features and in those issuers’ related hedging activities;
  
  
• Negotiating stable value contracts;
  
  
• Advising on available exemptions from registration as CPOs and CTAs and registering firms as CPOs, CTAs, futures commission merchants and introducing brokers;
  
  
• Advising firms on SEC, CFTC and NFA disclosure, reporting and record-keeping requirements;
  
  
• Assisting clients in SEC inspections and CFTC and NFA audits;
  
  
• Preparing policies and procedures for portfolio holdings involving futures, options and other derivative instruments;
  
  
• Reviewing and negotiating account agreements between registered investment companies, private funds, ERISA plans and other clients and futures commission merchants or broker-dealers regarding the trading of futures contracts and options;
  
  
• Preparing supervisory and internal liability control policies and procedures regarding futures and options advice and trading; and
  
  
• Providing advice, including the preparation of Congressional testimony, to a leading derivatives end-user industry association on legislative and regulatory developments, as well as industry developments in documentation practices.