Hedge fund style “drift” is said to occur when a hedge fund manager strays from their stated investment strategy. The term used to be an esoteric one, used only by professional hedge fund analysts. However, “drifting” is a problem that is lately coming into view more by regulators and in litigation by disgruntled investors. Managers that are [...]
Congressional Bill HR4624, the “Investment Adviser Oversight Act of 2012” has been introduced into Congress, with a hearing scheduled to be held tomorrow, June 6, 2012. The co-sponsors of the Bill are Finance Committee Chairman Spencer Bachus (R-AL) and Carolyn McCarthy (D-NY). The idea behind the Bill is that the SEC is spread too thin in [...]
Insider trading is an area of risk that hedge fund management finds very difficult to identify and prevent. While the problem has become increasingly prevalent, the tools to be able to assist hedge fund managers have not expanded proportionately. A break-down in personal trust in the industry as a whole may be to blame. The problem in [...]
Most investors contemplating investing in a hedge fund believe they are presented with a set of fixed terms for their investment. These terms are outlined in the private offering memorandum and appear to apply across the board to all investors. However, careful readers of the offering memo as well as the publicly available registration form (ADV) can ferret [...]
The results of coordinated state examinations of investment advisers in the first half of 2011 by the North American Securities Administrators Association (NASAA) reveal significant deficiencies in a broad range of areas. As investment advisers gear up nationally to register either with their state or the SEC in 2012, these results are important road maps of common pitfalls [...]
The role of directors on offshore hedge funds has often been, at best, a limited oversight role, with perfunctory annual meetings and limited interchange with the fund itself during the year.* This has been changing — slowly— as compliance moves to the top of the list of concerns for investors and managers alike. In addition, directors [...]
This past week, the SEC finalized rules requiring registration of most hedge fund investment advisers with either their state or the SEC. As mandated by the Dodd-Frank Act, a gaping regulatory hole has now been filled. Whereas under prior rules, most hedge fund advisers could avoid registration, all but the very smallest advisers will now [...]
As part of the Dodd-Frank Act, the SEC has just adopted a rich bounty program which gives some serious incentives to whistleblowers to report first to the SEC (and to internal compliance later). The consequences for hedge funds in particular could be onerous. The new whistleblower program makes it easier and more lucrative than ever to report a suspicion [...]
In the category of “Laws that Haven’t Caught Up with the 21st Century”, the internet aspects of the rules that prohibit hedge fund advisers from “advertising” may come in first place. The SEC rules only allow hedge funds to be offered on a “private placement” basis. This means no general solicitations are allowed. While this is understandable [...]
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