The allocation of trades has always been an area of concern to hedge funds. The issue is whether a manager is breaching its fiduciary duties by favoring one fund or account over another. The reason this issue is so problematic is that it is so hard to define. For example, consider these scenarios: *If a manager’s funds have different investment [...]
For hedge fund compliance professionals, a primary part of their job responsibility is to prevent or detect front-running. In the hedge fund context, front-running is generally defined as a manager or employee taking a position in an equity security prior to the fund, or filling an order for their own account prior to the fund’s. [...]
Over the past weeks of market turmoil, we have seen reports of hedge funds taking large defensive cash positions in order to preserve capital. For example, the Wall Street Journal reported earlier this week that Steve Cohen’s SAC Capital is half in cash and other short term instruments. While understandable, compliance professionals need to be alert [...]
It’s the question everyone’s asking in the hedge fund community… can hedge funds avail themselves of the Troubled Asset Relief Program (“TARP”)authorized under the Emergency Economic Stabilization Act? Under TARP, the government will purchase “troubled assets” from “financial institutions” in order to get them off the books of those institutions and thereby shore up the [...]
Although the rules may have changed between the time of this writing and the time you read it 20 minutes later, we thought it would be useful to post a list of new rules and regulations hedge fund compliance professionals will need to manage going forward. 1. Ban on Short Selling: Lists of banned stocks for [...]
As a compliance matter, hedge fund managers of multiple accounts may face no greater challenge than to avoid favoring some accounts over others, aka: “cherry-picking”. A lop-sided allocation of investments by a hedge fund manager may be a breach his or her fiduciary duty to clients. Some examples of “cherry-picking” are: -favoring a fund that [...]
Richard Ketchum CNBC Interview 8/13/08 In a landmark agreement announced today, the NY Stock Exchangeand FINRA have taken responsibility for the monitoring of insider trading for ten US exchanges. NYSE and NYSE-Arca listed securities trading will now be monitored by NYSE, and AMEX and NASDAQ-listed securities trading will be overseen by FINRA. This brings surveillance, [...]
“Dark Pools” are alternative liquidity pools that have been developed by broker/dealers to match buyers and sellers in non-public exchange transactions. The growth of these pools has increased exponentially recently — as much as 95% between 2004 – 2007, according to the Security Traders Association’s Special Report released on April 30, 2008. www.securitytraders.org These pools [...]
