Hedge Fund Blogs From HedgeCo.Net


SEC Charges Investment Adviser with Custody Rule Violations

October 29, 2014 Dear Friends, Today, the SEC announced charges against an investment adviser for violating the Custody Rule, for consistently delivering audited financials late. Pursuant to the Custody Rule, investment advisers with custody of private fund assets, must distribute audited financials to investors within 120 days of fiscal year end.  In this case, the firm delivered the audited financials […]

CFTC Grants Self-Executing No-Action Relief for CPOs

October 21, 2014 Dear Friends, The CFTC has further streamlined its Commodity Pool Operator (“CPO”) delegation process, granting self-executing, no-action relief to qualifying CPOs that delegate their CPO functions to a registered CPO. In May 2014, the CFTC required CPOs that delegate certain responsibilities to a registered CPO (e.g. GPs of limited partnerships that delegate CPO authority to a registered CPO) to submit […]

SEC’s First High Frequency Trading Manipulation Case

October 16, 2014 Dear Friends, Today, the SEC sanctioned a high frequency trading firm with fraudulent trading to manipulate closing prices, resulting in a $1 million penalty and marking the SEC’s first high frequency trading manipulation case. According to the SEC, the firm placed a large number of aggressive trades in the final two seconds of the trading day to […]

SEC Announces Enforcement Action Against Compliance Officer

Dear Friends, Yesterday, the SEC announced an enforcement action against a compliance officer for allegedly altering a trading review document.   In 2010, the SEC charged an employee with insider trading. According to the SEC, after the employee was charged with insider trading, the compliance officer altered the document to make it appear that she performed a more thorough review […]

SEC Charges PE Firm with Misallocation of Expenses

Dear Friends, The SEC charged a private equity firm with breaching its fiduciary duty to its funds, by sharing expenses in a manner that improperly benefited one fund over the other, resulting in a $2.3 million settlement. The firm integrated two portfolio companies and managed them as one, owned by two funds. From 2005 – 2013, the firm allocated expenses […]

SEC Charges Former Hedge Fund Manager

Dear Friends, Yesterday, the SEC announced charges against a former hedge fund manager for taking excess management fees from clients and using the money to remodel his home and buy a Porsche. Additionally, the SEC fined the hedge fund manager’s firm $150,000, for failing to supervise the him, even though the firm expelled him and reimbursed the hedge fund, once […]

SEC Sanctions 19 Firms for Short Selling Violations

September 16, 2014 Dear Friends, The SEC charged 19 firms and one individual trader with short selling violations, resulting in a $9 million settlement. Rule 105 of Regulation M (Reg M) prohibits purchasing securities in follow-on and secondary offerings when the purchaser has effected short sales in the securities within a specified period, prior to the pricing of an offering […]

SEC Enforcement Initiative Focuses on Late Filers of Section 13 and 16 Filings

September 16, 2014 Dear Friends, The SEC charged 28 officers, directors, major shareholders, and 6 publicly traded companies, in connection with its enforcement initiative to “root out repeated late filers” of  ownership reports.  The individuals named in the SEC’s orders failed to promptly report information about their holdings and transactions in company stock. The SEC is focusing on two types […]

SEC Director’s Speech on Important Compliance Issues for RIAs

September 12, 2014 Dear Friends, Yesterday, Norm Champ, Director of the SEC’s Division of Investment Management, gave a speech highlighting important compliance, examination, and enforcement topics for registered investment advisers including:  Presence Exam Initiative: The SEC is nearing completion of its goal of examining 25% of newly registered investment advisers.  Alternative Mutual Funds:  Hedge funds must carefully consider the heightened […]

CFTC Issues JOBS Act Relief

September 10, 2014  Dear Friends, The CFTC issued an exemptive letter harmonizing its rules with the SEC’s JOBS Act amendments, lifting the ban on general solicitation for certain CPOs, in connection with private securities offerings.  Previously, the CFTC’s marketing restrictions on private offerings prevented CPOs from engaging in general solicitations. The relief granted by the CFTC is not self-executing – CPOs […]

Matt Okolita to Participate in ALE-CLE Webinar on September 23, 2014

September 5, 2014 Dear Friends, On September 23, 2014, 12:30- 1:30pm EST, CounselWorks Managing Director, Matt Okolita, will be featured in an ALI-CLE phone seminar/audio webcast on Best Practices for Allocating and Disclosing Management Fees of Private Equity Fund Advisers. As we mentioned earlier this year, the SEC is focusing on private equity managers’ fees and expenses and how they […]

SEC Announces $300,000 Whistleblower Award

Dear Friends, For the first time, the SEC announced a whistleblower award for an employee that performed an audit and compliance function. The whistleblower was awarded more than $300,000, for reporting wrongdoing to the SEC, after the company failed to take action when the employee first reported it internally. “Individuals who perform internal audit, compliance, and legal functions.. may be […]

SEC Examining Alternative Mutual Funds

August 12, 2014 Dear Friends, The SEC has begun its sweep exams of alternative mutual funds. As we mentioned in a previous alert, the SEC’s sweep will focus on a variety of areas including liquidity, leverage, and board oversight. Please click here for a speech by Norm Champ, Director of the SEC’s Division of Investment Management, outlining the areas of […]

SEC Prosecuting Via ALJ Hearings

August 5, 2014 Dear Friends, As reported by the Wall Street Journal, the SEC is increasingly prosecuting wrongdoers in hearings before administrative law judges, rather than jury trials, where the SEC has recently lost a number of cases. Please click here for the Wall Street Journal article written by Russell Ryan, a former assistant director of enforcement at the SEC. […]

SEC Announces Whistleblower Award

  Dear Friends, Yesterday, the SEC announced an award of over $400,000 for a whistleblower who reported a fraud to the SEC, after the company failed to address the issue internally. According to the SEC, the whistleblower “did everything feasible to correct the issue internally,” and provided the Commission with specific, timely and credible information, allowing for a more rapid […]




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