Monthly Archives: November 2008

Banks and Hedge Fund Oversight: GAO Report

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This article is part of a series examining the statements in a report issued by the Government Accountability Office (GAO) in February 2008.  The items in this report are important because they provide insight into how the government views the hedge fund industry and how that might influence the future regulatory environment for hedge funds. The excerpt below is part of a larger report issued by the GAO; a PDF of the entire report can be found here. Continue reading →

Life Settment Case Law after “Life Partners” – SEC v. Mutual Benefits

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Many individuals involved in the life settlement industry point steadfastly to the “Life Partners” case when asked if life settlements are securities.  While “Life Partners” is a very important case in the life settlement industry, it should be noted that the case is not binding on any jurisdiction outside of the DC Circuit which means other jurisdictions could take alternative positions than the DC Circuit.  In addition, state securities commissions are not bound by the “Life Partners” case.  The case below highlights that depending on the nature of the activities of the life settlement sponsor, the life settlements could be securities at the federal level and thus subject to the securities laws (including potentially the investment advisory laws).

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Sale of Viatical Investments as Securities (Washington State)

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This release is from the Washington State Department of Financial Institutions.

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In 1999, Securities Administrator Deborah Bortner sent out a letter to insurance agents in the State of Washington regarding the applicability of the state securities laws to the offer and sale of viatical settlement contracts to investors. Under such a contract, a terminally ill person sells the death benefit in his or her life insurance policy in return for cash that can be used for current expenses. Continue reading →

Sovereign Wealth Funds (SWF) as Potential Hedge Fund Investors

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Hedge fund managers should be open to investments from all different types of investors including sovereign wealth funds or “SWFs.”  Sovereign Wealth Funds are government owned investment entitites.  Discussion of SWFs is usually with regard to many of the large oil producing countries, but a SWF can be established by any governmental entity including state entities (both Alaska and Texas have funds). Continue reading →

Forex Hedge Funds – Forex Commodity Pools

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This is a guide for those managers who want to start a forex hedge fund.  It provides information on forex hedge fund structures, an overview of the registration requirements, and a discussion of the process of forming a forex hedge fund.  For the purpose of this article we are focusing on spot forex transactions, but much of this information also applies to those managers who trade foreign currency futures and forwards contracts. Continue reading →

NFA Releases More Information on Forex Registration

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(www.hedgefundlawblog.com in conjunction with www.forexregistration.com)

The NFA released more information on the Forex registration requirements for Forex CPOs, Forex CTAs and Forex IBs (release is here).  The NFA specifically notes that the CFTC has not yet completed writing the registration requirements so there is not date set for registration.

With regard to the registration process, individuals will need to submit a Form 7-R throught the NFA’s Online Registration System and will need to have passed both the Series 3 exam and the new Series 34 exam which will be one hour wand will consist exclusively of forex-related questions.  The NFA has also released some of the exam topics which can be found here and which we have also republished as Forex Exam Topics.  The registrations will also need to submit fingerprint cards to the NFA which will be processed by the FBI.  Continue reading →

New Hedge Fund Regulations – Earlier Comments by Commissioner Atkins

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As I was reading the book “Fooling some of the People all of the Time” by hedge fund manager David Einhorn, I read a passage discussing a prior speach by SEC Commissioner Atkins.  The passage was:

We need to stop scaring ourselves and others with rhetoric about hedge funds. Rather than talking about how hedge funds “operate in the shadows,” let us take a look at the regulatory constraints on hedge fund advisors that stop them from saying anything about their funds publicly. One irony of the SEC’s complaints about the secretive nature of the hedge fund industry is that advertising restrictions on hedge funds have been interpreted broadly so that hedge fund advisors do not dare to say anything publicly. Continue reading →

Capital Introduction for Hedge Funds

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Capital introduction is the term used to describe investor referrals to hedge funds by prime brokers.  Many prime brokers and even mini-prime brokers will provide capital introduction services to their customers.  Typically this is done as a favor to the hedge fund and does not carry the high costs of a third party marketer.  However, unlike a third party marketer, the prime broker is probably not actively looking for investors for the fund and therefore actual capital introductions may be rare, depending on a number of factors including the individual broker and the investment strategy.  Continue reading →