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Category Archives: Hedge Fund Commentary

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 […]

SEC Sweep on Alternative Mutual Funds Imminent

Dear Friends, The SEC will begin its sweep exams of alternative mutual funds  “this summer or fall,” said Norm Champ, Director of the SEC’s Division of Investment Management, focusing on the following areas: Liquidity: Ability to satisfy investor redemption requests in a timely manner and compliance with liquidity thresholds – no more than 15% of net assets in illiquid securities […]

SEC Charges Golf Buddies in Insider Trading Ring

July 15, 2014 Dear Friends, The SEC charged a group of golfers with trading on material non-public information (MNPI), resulting in over $500,000 in illegal profits. The golfers must return their ill-gotten gains, with interest, and pay penalties of up to three times their gains. The MNPI source belonged to the same country club as the ringleader, who fed the […]

SEC Provides Guidance on Accredited Investor Verification

Dear Friends, The SEC has issued guidance on accredited investor verification methods for managers engaging in a general solicitation.  Specifically, the SEC narrowed its list of non-exclusive safe harbor verification methods as follows: Income: (a) If tax documents reflecting the purchaser’s income for the two most recent years are not yet available, the issuer could rely on IRS forms for the two most […]

D.C. Circuit Upholds Attorney-Client Privilege

July 7, 2014 Dear Friends, Recently, the U.S. Court of Appeals for the D.C. Circuit held that attorney-client privilege may be upheld in the context of an internal compliance investigation, if “one of the significant purposes” of the communication was to provide legal advice, “even if there were also other purposes for the investigation.” The Court overturned a  lower court […]

SEC Charges Traders with Reg. M Violations

July 2, 2014  Dear Friends,  Today, the SEC charged five traders with violating Rule 105 of Regulation M – short selling in connection with a public offering (Reg. M).  The traders agreed to pay a collective fine of nearly $750,000.  Reg. M prohibits purchasing securities in follow-on and secondary offerings when the purchaser has effected short sales in the securities […]

July 1, 2014   Dear Friends,   Recently the SEC provided guidance on the application of the Custody Rule to private funds utilizing special purpose vehicles (SPVs) or post-closing escrow accounts. SPV: Generally, as long as an SPV is owned by the investment adviser, the adviser’s related person(s) or pooled investment vehicle(s) controlled by the adviser or the adviser’s related […]

SEC Charges Firm with Pay-To-Play Violation

June 26, 2014 Dear Friends, For the first time, the SEC charged an investment adviser with violating the pay-to-play rules adopted in 2010. The firm paid an almost $300,000 fine due to $4,500 in campaign contributions made to a Philadelphia mayoral candidate and the Governor of Pennsylvania. The firm continued to accept fees from two public pension funds, within two years […]

SEC Charges Hedge Fund With Whistleblower Retaliation

Dear Friends, For the first time the SEC filed a case under its new authority to bring anti-retaliation enforcement actions. The SEC charged a hedge fund with engaging in prohibited principal transactions and retaliating against the whistleblower. The firm agreed to pay $2.2 million and to hire an independent compliance consultant. The CIO conducted transactions between the hedge fund and […]

SEC Chairman Announces Far-Reaching Initiatives

   Dear Friends, SEC Chairman Mary Jo White announced several far-reaching initiatives and rule proposals that would affect virtually every aspect of the stock market. She focused on the impact of computer-driven trading and the importance of updating the SEC’s regulatory regime accordingly. Notably, Chairman White proposed a rule that could require high-frequency traders to register as broker-dealers. Additionally, she […]