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Hedge Fund Governance And SEC Enforcement Proceedings

Bloomberg Law – Steve Cohen, Raj Rajaratnam, and numerous lesser known hedge fund managers have been charged or otherwise implicated in civil enforcement proceedings commenced by the Securities and Exchange Commission (the “SEC”) over the past few years, alleging misuse of material, non-public, information, sometimes in addition to other wrongdoing. Some of these funds are almost immediately forced to commence liquidation while others like Steve Cohen’s SAC Capital, struggle to survive while attempting to defend against the allegations and deal with the unfavorable attendant publicity.

Investment funds like those run by Cohen and Rajaratnam are usually structured as limited partnerships where the limited partners have invested to accomplish a specific investment objective based on the principals’ reputation and where the general partner and its affiliated management company are typically owned and/or controlled by the principal.

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