Tag Archives: hedge fund

Colorado Hedge Fund Law – Colorado Investment Advisor Privacy Rules

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Application of the Gramm-Leach-Bliley Act to Colorado Registered Investment Advisors

A common question for state registered investment advisors is regarding their responsibilities for maintaining the privacy of their hedge fund investors.  Many state securities divisions provide notice on their website regarding the applicability of the Gramm-Leach-Bliley Act to the manager’s investment advisory activities.  The Colorado Securities Division, which has a savvy and knowledgeable staff, has provided Colorado investment advisers with an overview of their responsibilities with regard to “non-public personal information.”  In general most hedge funds do not have a need to disclose the “non-public personal information” of their investors to outside parties, but if a hedge fund manager does need to disclose such information to third parties, then the manager should discuss this in greater detail with his hedge fund attorney.

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Another Commodity Pool Operator Fraud – Lesson in Hedge Fund Due Diligence

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We frequently discuss scams involving the investment management and hedge fund industry as a warning to potential hedge fund investors to take the hedge fund due diligence process seriously.  In the CFTC release posted below, we have a classic scam where the sponsors of a commodity/futures fund acted in a fraudulent manner and used the assets of the fund for their own personal reasons.  We have listed the items which the consent order found and how an experienced hedge fund due diligence team could have protected the investor from fraud. Continue reading →

Oregon Hedge Funds – Investment Advisor Issues

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Questions and Answers on Oregon Investment Advisor Registration For Hedge Funds

Some states will provide a good source of information to start up hedge fund managers which details whether the hedge fund manager will need to register as an investment adviser in the state of residence.  The following resource is from the Oregon Division of Finance and Corporate Securities and answers common questions that potential Oregon hedge fund managers would have regarding the Oregon investment advisor registration requirements.

Specifically this set of questions and answers shows us that there is no de minimis rule which would allow managers to escape investment advisor registration in Oregon; the Q&A also details the notice filing requirements in Oregon.  Even though SEC registered investment advisors will not need to register with the state securities division, the firm will need to “notice file” and pay a filing fee and investment advisor representatives of the firm will usually need to have the Series 65 and the investment advisory firm will need to pay a filing fee for the representative.  Continue reading →

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 →

Non-Accredited Investors in Hedge Funds

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Many start-up hedge fund managers want to know if their friends and family can invest in the start-up hedge fund.  Most of the time, such friends and family do not fall within the definition of accredited investor under the Regulation D rules. The regulation D rules allow a maximum of 35 non-accredited investors to invest in any single offering.  Because a hedge fund offering is continuous, the limit of 35 non-accredited investors is cumulative.  That means that over the life of the fund there can be no more than 35 non-accredited investors (as opposed to 35 non-accredited investors in the fund at any single point in time). 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 →

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 →

Hedge Fund Fraud – Prominent Hedge Fund Attorney is Wrongdoer

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Usually our discussion of hedge fund frauds revolves around unscrupulous promoters who engage in some sort of fraudulent behavior against hedge fund investors.  Most of the time the fraud is based on some sort of ponzi scheme.  However, in the case reprinted below, the fraud was actually perpetuated against many hedge funds, including some funds with a significant amount of assets under management.  Even more incredible is that the fraud was perpetuated by a hedge fund attorney with a very impressive background.  While this is slightly different than hedge fund affinity fraud, it does show that frauds can be found on all scales and that hedge fund due diligence is important for both investors and hedge funds.  It is important, maybe now more so than ever, that hedge funds conduct proper due diligence on their counterparties when engaging in private placements and off-exchange transactions.  Please contact us if you have any questions on hedge fund due diligence. Continue reading →

Hedge Fund Strategy – Energy Focused Hedge Funds

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We have previously provided an overview of hedge fund trading strategies.  While we mentioned the major trading strategies, we did not mention some of the more niche trading strategies like energy focused hedge funds.  Energy focused hedge funds can utilize a number of different trading strategies from investing only in energy related companies to investing only in energy commodities (commodity pools). Like many of the different strategies, the structure of energy hedge funds will depend on a number of factors including the instruments traded and the expected lifespan of the investments.  Additionally, if the energy hedge fund does trade in commodities, the manager may need to be registered as a CPO.  Continue reading →

Hedge Fund Service Providers Overview

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The hedge fund industry includes not only the hedge fund managers and the investors, but also the service providers that help the hedge fund and the manager with the day to day duties associated with running a hedge fund.

The industry has grown rapidly over the last decade and continues to develop at an ever rapid pace.  In the beginning there were hedge fund attorneys, prime brokers, hedge fund administrators, hedge fund auditors, but now we also have consultants, website designers, due diligence experts and compliance firms.  All of these businesses fall within the category of hedge fund service providers.  I’ve detailed the various roles of these businesses on other parts of this blog, but am producing this overview which should be especially helpful for start-up hedge funds. Continue reading →