Category Archives: Laws

Hedge Fund Managers and Investment Advisor Registration Status

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Many hedge fund managers who are registered as investment advisors with the SEC have experienced losses this year as well as investor redeptions.  For some managers the losses combined with investor redemptions may have the effect of decreasing an advisor’s assets below the $25million threshold for SEC investment advisor registration.  Generally an investment advisor is not allowed to be registered with the SEC if the manager’s assets under management do not exceed $25 million. Continue reading →

Alabama Hedge Fund Law – Regulation D Filings

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In our continuing effort to expand our hedge fund law resources on this blog, we will be posting statutes and other legal resources from each of the states.  Because each state has different laws and enforces those laws differently, hedge fund lawyers often discuss state specific hedge fund issues with the securities division prior to providing advice to clients.  The post below provides information on Alabama’s regulation D requirements.  Please contact us if you would like to establish an Alabama hedge fund or have questions on Alabama investment advisory issues. Continue reading →

NFA Makes Two Separate Announcements on New Forex Rules

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(www.hedgefundlawblog.com) Today the NFA made two separate announcements regarding proposed new forex rules.  The announcements follow a series of similar announcements last week regarding new forex rules (see NFA Continues to Pursue Forex Regulation for Current Forex Dealer Members).  The first announcement dealt with additions to Compliance Rule 2-36 and related Interpretive Notice Changes.  The second announcement dealt with a completely new forex Compliance Rule 2-43.

NFA Proposes Addition to Compliance Rules 2-36 and Related Interpretive Notices – this announcement contained a hodge-podge of different rules the NFA staff felt needed to be addressed.  The announcement centrally focuses on (i) requirement that forex hypothetical results be subject to the anti-fraud provisions of NFA Compliance Rule 2-29(c),* (ii) require FDMs to have an Associated Person file the required weekly reports, (iii) require FDMs to adopt written policies regarding the calculation of rollover interest charges and payments, and (iv) prohibits FDMs from trading a customer’s account when they are a counterparty to the trade.  Continue reading →

Wisconsin Based Hedge Funds – Wisconsin Investment Advisory Rules

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One of the key issues which hedge fund managers will need to determine early in the hedge fund formation process is whether the management company will need to be registered as an investment adviser with the state securities commission (or potentially with the SEC).  Generally the lawyer advising the management company will survey the state laws to determine whether or not registration is necessary.  While the lawyer will look directly to the state statutes through some sort of online legal database such as Lexis Nexis (to ensure that the most current and up to date information is provided to the client), the hedge fund manager can also check with his state securities commission to see if registration is required.  Sometimes states, such as Wisconsin, will include their registration information on their website.  The notice below is typical of such a practice. Continue reading →

NFA Proposes that all CPO and CTA Disclosure Documents be Filed Online

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CFTC Responds by Proposing Changes to CFTC Regulations Regarding Disclosure Documents

The CFTC recently proposed a change to its regulations based on a request from the NFA.  The proposed regulations would require CPO and CTA disclosure documents to be submitted only online to the NFA for approval.  The CFTC is requesting comments on this proposal which must be recieved on or before December 26, 2008.  The Hedge Fund Law Blog will be sumitting comments on this proposal.  We believe that this is a good change.  We may also ask for clarification to make sure that such requirement will also apply to Forex CTOs and Forex CTAs.  Please let us know if you have any comments to the proposed rules which are reprinted in their entirety below.

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Authority of Various Securities Laws and Releases/ Interpretations

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The reference below comes directly from the SEC website and provides the reader with a good overview of the different laws and rules which govern the hedge fund industry, and the order in which those rules are applied (that is, the securities statutes trump SEC interpretive releases).  This reference is important for hedge fund managers to understand because there are many different types of authority which are cited in this blog and in the hedge fund offering documents and hedge fund compliance manuals.  If you have questions on what sources are the most important for your particular situation, you should discuss this with your hedge fund attorney.  As always feel free to contact us if you have legal questions regarding your hedge fund.  Continue reading →

Connecticut Hedge Fund Registration Exemption

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State Level Hedge Fund Investment Advisor Exemptions – Connecticut Exemption

Hedge fund managers which are not required to register as investment advisors with the SEC because of the exemption in Section 203(b)(3) of the Investment Advisers Act may still need to register as investment advisors with the state securities commission of the state where they have their place of business.   Continue reading →

Hedge Fund Law – Summary of Hedge Fund Laws and Regulations

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he following is a summary of the major laws which affect the hedge fund industry.  If you have any questions on how these laws impact hedge funds in general or your specific situation, please contact us.

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Securities Act of 1933 – the 1933 Act was enacted on May 27, 1933 as a reaction to the market crash of 1929. The overarching purpose of the act was to require that all “securities” be registered with the government (at the time the FTC). The Act provides some exemptions from this general requirement; for hedge fund managers, the most important exemption from registration is found in Section 4(2) which provides that securities will not need to be registered is they are sold in a transaction which does not involving any public offering. Continue reading →

Overview of the Securities Act of 1933

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The Securities Act of 1933 (the “Securities Act”) is the cornerstone to the regulation of securities in the United States. The most important feature of the act is the requirement that all securities be registered or fall within an exemption from registration.  This overview will detail the important provisions of the Securities Act. 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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