Tag Archives: hedge fund law

Idaho Hedge Fund Law

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Idaho has another well run securities division and their website is particularly helpful.  The information below comes from their website and describes the major laws that hedge fund managers in Idaho need to be concerned about.  The information is applicable to traditional securities-only hedge fund managers (with regard to investment advisor registration) and also to forex hedge fund managers.  Like many states Iowa has enacted a commodity code which may apply to forex managers depending on the nature of the manager’s forex program.  Continue reading →

Investment Advisor Fraud

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Another Investment Advisor Ponzi Scheme

In the wake of the Madoff scandal the SEC is taking out other fraudulent investment advisory firms.  The release below details a south Florida investment advisor who perpetrated a multi-million dollar ponzi scheme.  As we noted in Lessons in Hedge Fund Due Diligence, it is so important for investors to conduct proper due diligence on their investment advisors or hedge fund managers. Continue reading →

Starting a Hedge Fund – Primer for Start Up Hedge Fund Managers

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How to Start a Hedge Fund

Many future hedge fund managers have misconceptions about how to start a hedge fund – either they think it is a very basic process that takes no time or resources, or they think that it will take too much time and will be cost prohibitive.  For most start up hedge funds, the manager can be up and running within a month depending on whether the manager will need to be registered with the state securities commission (please see our article on start up hedge fund timelines).  This article will detail the steps the manager will need to take to start the hedge fund. Continue reading →

SEC Hedge Fund Registration Exemption – Section 203(b)(3) and Rule 203(b)(3)-1

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Exemption from the Registration Provisions of the Investment Advisors Act

We have discussed the SEC hedge fund registration exemption many times before, but we have not addressed it directly.For most management companies with a single hedge fund client, registration is actually a relatively easy and straightforward process.  Once hedge fund managers are registered as investment advisors with the SEC there are certain recordkeeping requirements for the hedge fund manager, but the requirements are not onerous (for more information, please see ).

Notwithstanding the above, many managers will choose to remain unregistered for a variety of different reasons and those managers will typically rely on the hedge fund registration exemption found in Section 203(b)(3) of the Investment Advisors Act of 1940.  The exemption and the rule underlying the exemption is detailed in full below. Continue reading →

Obama Names Future Financial Market Regulators

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President-elect Brarack Obama’s choices for the head of the SEC and the CFTC have been generally well-received.  Mary Schapiro and Gary Gensler have very large jobs ahead of them as Congress is expected to require hedge fund registration with the SEC, and the CFTC also has the mandate to regulate the off-exchange forex markets.  As always we stess that any regulation should be reasonable and considered; knee-jerk legislation will not lead to more fair markets.

The releases below come from current SEC Chairman Cox and CFTC Acting Chairman Lukken. Continue reading →

Illinois Hedge Fund Law – Various Laws and Regulations

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Perhaps not surprising, Illinois has a very well developed Securities Division website which provides its investment advisors (and potential investment advisors) with many informative articles.  In this article we have reprinted three separate resources which we found helpful for potential hedge fund managers located in Illinois.

The first resource provides a basic overview of investment advisors and the separation of regulatory jurisdiction between the federal government and the states.  This resource is glib on whether hedge fund managers in Illinois need to register as investment advisors with the state – generally they do not.  For those managers which are registered with Illinois, the second resource provides an overview of the potential for on-site examinations of the manager’s business.  The final resource provides an overview of the different fees which an advisor registered (or notice filed) in Illinois will need to pay. Continue reading →

Offshore Hedge Funds – Side by Side Hedge Fund Structure

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Offshore hedge funds can be structured in a number of different ways including a stand alone structure, a master-feeder structure and a side by side structure.  This article discusses the side by side hedge fund structure and also provides a side by side offshore hedge fund organizational chart.  As we have noted earlier in an article regarding offshore hedge fund structural considerations, a side by side offshore hedge fund is a structure consisting of two distinct entities which are managed in the same way by a single management company.

I attached the following Offshore Side by Side Hedge Fund Organizational Chart so that hedge fund managers can get an idea of the structures involved and the flow of payments. This specific chart details (1) a management fee and a performance allocation paid from the domestic counterpart and (2) a management fee and a performance fee paid from the offshore counterpart.  Offshore hedge fund managers should discuss these aspects of their offshore hedge funds with their attorneys. Continue reading →

South Carolina Hedge Fund Law – Investment Advisor Registration and Form D Filings

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Below we have provided two separate sources from the South Carolina Securities Division Website.  First, we have reproduced a very short blurb from their website which explains that investment advisors who have a place of business in South Carolina must generally be registered as an investment advisor.  Second, we have reproduced their schedule and instructions for the state blue sky filings which need to be made by the hedge fund manager after the first sale of securities in the state.  In general hedge fund interests are sold in accordance with a Regulation D 506 hedge fund offering.  States generally have the authority to require Form D filings when a sale under 506 is made to residents of the state.  In South Carolina the requirement is to make the Form D filing within 15 days of the first sale in South Carolina.  The hedge fund manager will also need to send in a check for $300.  Continue reading →

Georgia Hedge Fund Law – Investment Advisor Registration Exemption

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Georgia Hedge Fund Managers Generally Exempt From Registration

Below we have provided two separate sources from Georgia’s Securities Division Website.  First, we have reproduced their frequently asked questions on investment advisor registration.  Specifically it should be noted that Geogia based hedge fund managers do not generally need to register as investment advisors with the state of Georgia if they only manage one fund.  While managers are not required to be registered, they still will need to make sure that they follow all necessary compliance rules which the hedge fund lawyer can remind them of. Continue reading →

Offshore Hedge Fund Formation Overview – Hedge Fund Timeline

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There are many reasons why managers will want to form hedge funds in offshore jurisdictions like the Cayman Islands or the British Virgin Islands.  While a domestic hedge fund can be established in as little as two to three weeks (depending on whether the manager must be registered as an investment advisor), the offshore hedge fund will usually take around 6 to 10 weeks to form, depending on a number of different factors.  This article will detail the process of creating an offshore hedge fund.  Continue reading →