Monthly Archives: December 2008

Cox Comments on Madoff Investigation

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Statement Regarding Madoff Investigation
FOR IMMEDIATE RELEASE
2008-297

Washington, D.C., Dec. 16, 2008 — Securities and Exchange Commission Chairman Christopher Cox issued the following statement today concerning its ongoing investigation in the case of SEC v. Madoff:

Since the Commission first took emergency action against Bernard Madoff and his firm, Bernard L. Madoff Investment Securities, LLC on Thursday, December 11, every necessary resource at the SEC has been dedicated to pursuing the investigation, protecting customer assets and holding both Mr. Madoff and others who may have been involved accountable. Continue reading →

Hedge Fund Lock-Up Period

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What is a hedge fund lock-up?

Recently there have been many discussions about hedge fund structures and terms, including the ability (or inability) of investors to withdraw from hedge funds.  Generally the manager will have a number of structures in place to make sure that capital stays in the hedge fund.  These provisons include the hedge fund gate, the ability to limit all withdrawals in certain circumstances, and the hedge fund lock-up provision.

The hedge fund lock-up provision is a provision which provides that during a certain initial period, an investor may not make a withdrawal from the fund.  The period when the investor cannot withdraw the funds is known as the actual lock-up period.  Continue reading →

Massachusetts Hedge Fund Law – Investment Advisory Registration Renewals

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Unfortunately for hedge fund managers who are located in Massachusetts, there is generally a requirement to be registered as an investment advisor with the Massachusetts Securities Division.   One of the good things about the Massachusetts Securities Division is that they are generally knowledgeable and the division’s website posts good information for registered investment advisors.  The posts below deal with (1) Massachusetts investment advisor renewals for 2009 and (2) a discussion of the submission requirements for ADV part II through the IARD system.

While these posts are helpful, Massachusetts hedge fund managers are urged to discussion any questions with a hedge fund attorney.  Continue reading →

Green Fund of Hedge Funds

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The following article on a green fund of hedge funds was originally published on the website www.socialfunds.com and can be found here.  (For more information on environmentally focused hedge funds, please also see our article on Carbon hedge funds.)

Over the Hedge: New Green Hedge Fund of Funds
by Anne Moore Odell

Kenmar plans to launch socially responsible hedge fund of funds for institutional investors.

SocialFunds.com — Kenmar recently announced that it will be launching a new SRI hedge fund of funds, the Kenmar Global ECO Fund SPC Limited, which will be available to investors July 1. Kenmar hopes to tap into the growing interest of investors in environmental, social, and corporate governance (ESG) issues while also achieving its goal of capital appreciation. Continue reading →

Operational Issues for Hedge Fund Managers Using Multiple Prime Brokers

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The hedge fund and investment management industry has seen many radical changes during the last year, including the consolidation (or elimination) of the large prime brokerage firms.  Because of these events many funds have moved to a multi-prime broker model instead of the more traditional single prime broker model.  There are obviously many advantages to going to a multi-prime broker model (including the reduction of prime broker bankruptcy risks), but there are also many logistical issues which need to be considered.

Start up hedge funds which wish to use a multi-prime broker approach should discuss this option with their hedge fund attorney as well as their hedge fund administrator which will be able to help with the back end aggregation of the prime brokerage fees.  Additionally, managers may want to seek a software solution like the one from Advent described in the press release below.  Continue reading →

Carbon Hedge Funds

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Overview of Carbon Hedge Funds

The flexibility of the hedge fund structure is the central reason these investment vehicles are so popular.  The flexibility allows funds to specialize on certain investment sectors or strategies, and they can move quickly to the hot areas of the markets.  One of the hot areas of the markets is the movement toward green investments and strategies.  With this increased focus on energy and related areas, Carbon Hedge Funds have become a popular investment vehicle to focus on “carbon” as a new asset class.  This article will overview the two common carbon hedge fund strategies and will also provide resources for more information on carbon trading and other investments.  Please contact us if you have any questions on the information below or if you would like more information on starting a carbon hedge fund. Continue reading →

Exemption From Florida Investment Advisory Registration

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Most states do not have securities laws which provide hedge fund managers with an exemption from investment advisor registration at the state level.  However, Florida does have an exemption which many Florida based hedge fund managers rely upon in order to avoid registration with the Florida Securities Division.

Specifically, Section 517.021(13)(b) of the Florida laws provide that the term “investment adviser” does not include “any person who does not hold herself or himself out to the general public as an investment adviser and has no more than 15 clients within 12 consecutive months in this state.”  Of course the Florida hedge fund manager or prospective manager and the hedge fund attorney should discuss whether the manager’s investment advisory activities will fall within this definition.  Continue reading →

Florida Hedge Fund Law – Investment Advisor Registration Information

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Florida is a very popular jurisdiction for hedge fund formation.  Along with New York, Connecticut, California, and Texas, Florida ranks as one of the most popular hedge fund jurisdictions.  I have included below a description of the investment advisor provisions from the Florida Securities Division website.  One thing to note, as with all Securities Division websites, is that the information below is not the full picture.  For instance, the notice below does not mention a common provision which exempts Florida hedge fund managers from investment advisor registration with the state. Continue reading →

FINRA New Issue Rule 5130 (Text of the Rule)

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As we announced earlier today, the NASD New Issue Rule 2790 has changed and is now FINRA Rule 5130.  The text of the New Issue rule is below and can also be found on the FINRA website here.  With regard to hedge funds, this rule is most important with regard to who will be deemed a “restricted person” and thus generally ineligible to recieve a full allocation of any gains attributable to new issues (commonly known as initial public offerings or IPOs).  The full text of the rule follows.  Continue reading →

Hedge Fund “New Issue” Rule Changes

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Minor Modifications to “New Issues” Rule Approved; New FINRA Rule 5130

FINRA (formerly the NASD) has been reworking a new rulebook which means that many rules have been modified and renumbered.  At least one important hedge fund rule has been renumbered.  The “new issue” rule, which affects hedge funds and other members of the securities community, has been slightly modified and is now known as FINRA Rule 5130 (formerly Rule 2790). Hedge fund managers should discuss with their attorneys whether their hedge fund offering documents need to be updated to reflect this change.  Continue reading →