Tag Archives: SEC

Hedge Fund Registration Becoming More Likely

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SEC Commissioner Calls for Hedge Fund Registration in Two Recent Speeches

In two separate speeches this year SEC Commissioner Luis A. Aguilar has called for hedge fund registration.  Commissioner Aguilar, appointed to the Commission last year, asked Congress to pass legislation amending the Investment Advisors Act to give the SEC authority to regulate hedge funds or hedge fund advisors.  Aguilar believes that increased regulation will provide the SEC with more information about funds and will also give the SEC the necessary tools to identify and potentially prevent misconduct prior to investor losses.  Continue reading →

Hedge Fund Audits Post Madoff

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Hedge Fund Audits Expected to Increase in Importance

The Madoff scandal has shown the hedge fund industry many things, not the least of which is the importance of hedge fund audits.  While the details of Madoff’s audits are still a little unclear, it has been widely reported that the audit firm he used was a little known shop which is tightlipped.  This article investigates reaction of hedge fund investors with regard to hedge fund audits going forward.  (Please note, the Maddoff investment firm was not a hedge fund; however, the scandal will likely have a great influence on hedge fund due diligence and audit standards.) Continue reading →

SEC Stands Behind “Fair Value” Accounting

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FASB may re-evaluate FAS 157 in light of recent market events

While the SEC does not directly control the manner in which hedge fund assets are valued for the purpose of striking a NAV for a fund, the SEC valuation policies are important for hedge funds in a number of different ways.  Maybe most important is that the SEC valuation guidelines require issuers of securities to adhere to certain valuation practices with regard to their own assets.  Recently Congress mandated the SEC reevaluate its valuation guidelines in light of the market collapse of 2008. 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 →

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 →

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 →

California Investment Advisors Renewal Notice

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I received this notice today from the California Department of Corporations.  All California registered Investment Advisors should take note that IARD renewal fees are due by next Friday, December 12.  If you are registered and need help with the renewal process, please contact us.  Continue reading →

Investment Advisor Barred From IA Industry For Matching Trade Fraud

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Hedge fund managers should not match trades between commonly managed accounts in thinly traded (or illiquid) securities as this may pose potential problems under the Investment Advisors Act of 1940.  This holds true whether the hedge fund manager is registered or unregistered.  As the release below shows, the manager may be subject to fines and/or other penalties for such trading.  If a hedge fund manager does wish to engage in such trading, he should discuss this option with a hedge fund attorney.  Please contact us if you have any questions.  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 →