# Legal standards

`kaal:entity:legal-standards`

**Status.** derived

This node is assembled mechanically from the 13 claims that carry the concept tag `legal-standards`. It is a roster of what the corpus says under this term. It is **not** an adjudicated definition: no single statement here has been ruled canonical, and no first-appearance call has been made. Read the claims and judge for yourself.

## Every claim under this term

13 claims across 3 works, 2016 to 2021.

**2016**

- [2811718-005](https://wulfkaal.github.io/claims/2811718-005) [failure/argued] *(failure mode)* -- Almost no guidance exists on the standards applicable to private fund investor due diligence, so despite the growing importance of due diligence in capital formation and in litigation the industry is left mostly to its own devices to ensure adequate standards.
  > Little to no guidance exists on applicable standards for IDD.18 Despite the increasing relevance of IDD in the capital formation and allocation process, and IDD litigation, the industry is mostly left to its own devices to ensure adequate due diligence standards apply.
  Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718
- [2811718-006](https://wulfkaal.github.io/claims/2811718-006) [failure/argued] *(failure mode)* -- The existing resources fail on both sides: industry materials describe best practices without setting out the legal requirements for private fund due diligence, and the available case law provides only marginal guidance.
  > Available resources describe best practices but do not sufficiently outline the legal requirements pertaining to private investment fund due diligence.19 The available case law only marginally provides relevant guidance on private fund IDD.
  Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718
- [2811718-017](https://wulfkaal.github.io/claims/2811718-017) [empirical/evidenced] -- While some courts found that a complete lack of investor due diligence can amount to securities fraud or breach of contract, and that lacking due diligence can breach fiduciary duties, the majority of courts evaluate private fund due diligence issues in the context of misrepresentation.
  > IDD can be a breach of fiduciary duties,84 the majority of courts evaluate issues pertaining to private fund IDD in the context of misrepresentation.
  Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718
- [2811718-018](https://wulfkaal.github.io/claims/2811718-018) [condition/argued] -- Successful claims based on lacking investor due diligence typically require a complete failure to perform due diligence despite explicit promises to perform it; promising due diligence and then conducting none except in isolated incidents is actionable misrepresentation.
  > Successful lawsuits in the context of lacking IDD typically require a complete lack of due diligence despite explicit promises to perform such due diligence.90 Promising to conduct due diligence and then failing to conduct any (except in isolated incidents), is actionable misrepresentation.
  Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718
- [2811718-019](https://wulfkaal.github.io/claims/2811718-019) [condition/evidenced] -- Relying solely on a representation by the investment or the fund, without actually performing due diligence, is sufficient to present a fact issue on fraud to a jury.
  > Relying solely on an investment or fund representation and not actually performing due diligence is sufficient to present an issue of fact to a jury for fraud.
  Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718
- [2811718-020](https://wulfkaal.github.io/claims/2811718-020) [failure/evidenced] *(failure mode)* -- Deficient due diligence does not create securities fraud liability unless it is intentional or highly reckless; conduct that is merely negligent or professionally incompetent falls short of the scienter requirement.
  > Courts hold that the lack of due diligence, beyond merely being negligent or just professionally incompetent, must be intentional or highly reckless.
  Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718
- [2811718-022](https://wulfkaal.github.io/claims/2811718-022) [condition/evidenced] -- Defendants owe a duty to use reasonable care in conducting financial due diligence consistent with the standards of care in the profession.
  > Defendants have "a duty to use reasonable care in conducting financial due diligence consistent with standards of care in the profession.
  Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718
- [2811718-024](https://wulfkaal.github.io/claims/2811718-024) [condition/evidenced] -- Failure to supervise and direct investment of assets in accordance with an investment plan's policy, together with offering memoranda or quarterly letters that misrepresent due diligence processes, can show a failure to exercise reasonable care sufficient to plead breach of fiduciary duty.
  > assets in accordance with an investment plan's investment policy, and offering memoranda or quarterly letters with misrepresentations of due diligence processes can demonstrate a failure to exercise reasonable care and sufficient to plead breach of fiduciary duty.
  Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718
- [2811718-030](https://wulfkaal.github.io/claims/2811718-030) [condition/evidenced] -- Funds that promise due diligence with no intention of actually carrying it out violate federal securities laws rather than merely breaching a contract.
  > but it has been held that funds that promise due diligence and yet have no intention of actually carrying it out are violating federal securities laws rather than breaching basic contracts.
  Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718
- [2811718-034](https://wulfkaal.github.io/claims/2811718-034) [failure/evidenced] *(failure mode)* -- The legal standards applicable to private fund investor due diligence are somewhat inconsistent and suboptimal and merit clarification.
  > This study has demonstrated that the legal standards applicable to private fund IDD are somewhat inconsistent and suboptimal, and merit clarification.
  Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718
- [2811718-040](https://wulfkaal.github.io/claims/2811718-040) [failure/evidenced] *(failure mode)* -- Despite bringing enforcement actions over misrepresentations about due diligence, the SEC has not taken a rigid enforcement position on whether particular due diligence industry practices are effective, and has merely acknowledged that practices became more robust after the financial crisis.
  > Despite a number of enforcement actions that deal with misrepresentation in relation to due diligence,46 the SEC has not taken a rigid enforcement position on the effectiveness or ineffectiveness of due diligence industry practices.
  Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718

**2017**

- [2998097-030](https://wulfkaal.github.io/claims/2998097-030) [failure/evidenced] *(failure mode)* -- The legal standards applicable to private fund investor due diligence are somewhat inconsistent and suboptimal and merit clarification.
  > The study demonstrated that the legal standards applicable to private fund investor due diligence were somewhat inconsistent and suboptimal and merited clarification.
  Wulf A. Kaal, Private Investment Fund Regulation - Theory and Empirical Evidence from 1998 to 2016 (2017). SSRN: https://ssrn.com/abstract=2998097

**2021**

- [3949098-033](https://wulfkaal.github.io/claims/3949098-033) [normative/asserted] -- The decentralized reputation staking governance mechanisms provide a higher form of decentralized governance than most legal standards in any given jurisdiction.
  > (Calcaterra & Kaal et al (2019)) provide a higher form of decentralized governance than most legal standards in a given jurisdiction.
  Wulf A. Kaal, Reputation as Capital – How DAOs Upgrade Finance (2021). SSRN: https://ssrn.com/abstract=3949098

## Verify

Every claim above resolves to a record carrying a verbatim source quote, the sha256 of the source PDF, and a preformatted citation. Nothing here asks to be taken on trust.

    curl -s https://wulfkaal.github.io/entities/legal-standards.md | sha256sum

**Canonical form.** This markdown file is the canonical hashed representation of this entity node. Its sha256 is the content hash.