In an era of increased regulatory scrutiny and evolving technology, what is the state of attorney-client privilege in the fund management industry? Independent fund boards and those who communicate with them, find themselves in the middle of these increasing regulations—often with more questions than answers. This webinar will educate financial professionals in the funds industry on best practices regarding communications between fund management and fund boards in a contemporary setting. After viewing the webinar, attendees will be able to: - Characterize what is attorney-client privileged—and what is not - Delineate what constitutes appropriate digital communications - Enact measures to protect confidential information from cybersecurity breaches

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Privilege and Proprietary
Information in the Digital Age
Are You As Protected As You Think?

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DISCUSSION TOPICS
• What is attorney-client privileged – and what
is not?
• Kenny v. PIMCO Ruling
• Chill v. Calamos Ruling
• Digital communications and boards
• Protecting confidential information from
cybersecurity breaches
• Some key takeaways

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What is Attorney-Client Privileged–
And What is Not?
A. What it is in context of board communications
 Must include advice
B. What/who is traditionally covered
 Communications between a client and his or her attorney
C. What may not be protected
 Certain types of communication with independent trustee counsel
 Communications with fund management, fund counsel
D. Attorney work-product doctrine
 Developed while representing a client and in anticipation of litigation
E. Waiver of privilege
 Be wary of inadvertently waiving
F. How SEC staff views the exercise of privilege—then and now

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The Kenny v. PIMCO Ruling
A. A “district court” ruling from the Western Dist. of Wash. in the 9th
Appellate Circuit.
B. The court ruled for plaintiff that the attorney client privilege did not
apply to communications between the Independent Trustees of the Fund
and Fund counsel.
C. The court used the “fiduciary exception” to support its ruling and applied
two theories:
1. The “Real Client” Theory
2. The “Duty to Inform” Theory
D. DBR’s view – this appears to be a misapplication of these legal theories.
Historically, these theories had been only been applied by courts to
traditional trustee-beneficiary relationships and not in the investment
company context.

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The Kenny v. PIMCO Ruling
E. This type of ruling can serve as motivation to the plaintiff’s bar. Indeed,
two recent motions from cases serve as examples:
1. Obeslo, et al. v. Great-West Life and Annuity Ins. Co., et al., pending in the
Dist. of Colorado.
2. Chill v. Calamos Investment Trust, et al., filed in the Northern Dist. of Illinois.
F. Practice Points:
• Treat every communication as if it could potentially be discoverable.
• Benefits of phone calls.

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The Chill v. Calamos Ruling
A. The Trust and Trustees were not named as defendants in the underlying
case pending in the Southern Dist. of N.Y. They reside in the Northern Dist.
of Ill., where plaintiffs filed the motion.
B. Like Kenny, plaintiffs sought the production of documents claimed to be
privileged based on the “fiduciary exception.”
C. Respondents did not dispute the application of this exception, but argued
that the second element of the application of this exception needed to be
applied.
1. Plaintiff has the burden to establish “good cause” to overcome the privilege.
2. Several factors establish good cause – including the most important – the
necessity of the privileged information versus its availability from other
sources.

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The Chill v. Calamos Ruling
D. In ruling in the Trust’s and the Independent Trustee’s favor, this court
found that the plaintiffs failed to come “forward with a particularized
showing of need for specifically identified documents” and thus failed to
show “good cause.”
E. The court stated that it was unwilling to pierce the privilege to allow for a
“fishing expedition.”
F. Notably, this court distinguished the Kenny ruling, because the Kenny
court did not apply the good cause analysis (it’s not a requirement in the
9th Appellate Circuit).
G. The recommended practice points from the previous slide remain
strongly recommended.

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Digital Communications and Boards
A. Board fiduciary duties and record keeping
B. Duty to preserve and discovery issues
 Forward versus backward looking requests
 Special considerations relating to Board portals and electronic board books
o Duty to preserve – does it apply?
o How safe are board portal sites?
o Note taking features, tracking of use, messengering features . . . and the
risks they may present.

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Digital Communications and Boards
C. Email correspondence
 Importance of separate email accounts for board members
 What not to say in an email
D. Telephonic communication
 Includes text messaging
 Consider special application for messengering
 Voicemail technology

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Protecting Confidential Information
from Cybersecurity Breaches
A. Electronic board book provider
 Security assessment
 Ask about cybersecurity program and procedures
 Under what circumstances would you be notified of a breach?
 What is considered to be a breach?
B. Company proprietary information and hacking
 Assessment of software tools
 Testing
 Is deleted information really deleted?
 Metadata, document drafts
 Who has access to your data at a third-party service provider?

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Some Key Takeaways
• Apply best practices to all communications—email, texting, telephone
messages.
• Recommend separate communication streams between boards and
company management.
• Never intermingle personal or other company data with board data.
• Remember that for all practical purposes nothing is ever truly deleted.
• Write every communication as if it will appear on the front page of the
WSJ.
• Be mindful of who is on email distribution lists – cc’ing non-client/third
parties likely will operate as a waiver of the attorney-client privilege.
• Include review of electronic Board book providers cybersecurity programs
in cybersecurity oversight procedures.
• Test the security of information for the portals that you use.

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Stacy Louizos
Partner|InvestmentManagementGroup|DrinkerBiddle&ReathLLP
Stacy is a partner in the firm’s nationally ranked Investment Management Practice Group. Her national practice focuses on the
representation of registered investment companies and their independent directors and investment advisers. Over the past
nineteen years, she has advised clients on a broad range of matters relating to the operation of investment companies,
including the organization and offering of open-end and closed-end investment companies, mergers of individual mutual funds
and of fund complexes, and board governance, compliance and other regulatory matters under the federal securities laws. She
has served as fund counsel and/or counsel to the independent directors of fund complexes of all sizes, including a number of
large and well-known fund groups. Stacy regularly counsels and assists independent directors in their annual 15(c) contract
approval process and advises on topics such as board governance best practices, distribution, D&O insurance, and risk
management oversight. She has substantial experience relating to variable annuity insurance funds, funds of funds, manager of
managers structures, series trusts, alternative investment funds, master-feeder funds and money market funds. Stacy has been
consistently recommended in the area of Mutual/Registered Funds law in The Legal 500 United States. She received her J.D.
from Washington & Lee University and her B.A. from The University of North Carolina at Chapel Hill.
James G. Lundy
Partner|SEC&RegulatoryEnforcementGroup|DrinkerBiddle&ReathLLP
FormerlywithSECEnforcement&OCIE
Jim Lundy represents investment management firms, broker-dealers, hedge funds, public companies, audit firms, futures firms,
and individuals in investigations and enforcement actions instituted by the SEC, CFTC, FINRA, and other self-regulatory
organizations (SROs), as well as in high-risk regulatory examinations, securities and futures fraud investigations conducted by
the Department of Justice, and complex business litigation. With his collective experiences, including 12 years of SEC
experience and more than two years of senior in-house counsel experience, Jim has developed an in-depth working knowledge
of the various regulatory bodies with enforcement, examination, and regulatory oversight of the financial services
industry. Specifically, Jim spent nine successful years with the SEC’s Enforcement Division as a senior trial counsel and as a
branch chief, and then spent his final three years as a senior regulatory counsel in OCIE and assisted with operating the SEC’s examination program for the
Midwest region. Prior to joining Drinker Biddle, Jim served as an associate general counsel at a brokerage firm affiliated with a European-based global
bank, where he handled representations before the SEC, CFTC, FINRA, and other SROs. Jim co-maintains Drinker Biddle’s SECurities Law Perspectives Blog,
which provides reports, discussions, and analyses on noteworthy trends in the enforcement and regulatory activities of the SEC, CFTC, and other financial
regulatory agencies. He is a member of Drinker Biddle’s SEC & Regulatory Defense Team.

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Matthew Sullivan
SeniorSecurityEngineer| Workiva
Matthew Sullivan is a Senior Security Engineer at Workiva in Ames, Iowa. Matthew specializes in web application
security assessment and has authored several network security auditing tools which aid in the discovery of vulnerable
application deployments. He holds two patents in the highly competitive space of cloud encryption key management,
is the co-founder of the OWASP Ames chapter, and regularly presents to both technical and non-technical audiences
at various conferences and seminars.