Compliance Solutions for Investment Advisers

SEC vs. Hedge Funds (Guess Who is Winning)

In her recent talk before the Managed Funds Association, SEC Chair Mary Jo White detailed how the SEC has been “active” in bringing enforcement cases involving private funds.  Chair White has obviously mastered the art of understatement. After all, does a week go by where we don’t read about an insider trading case involving the world’s largest hedge funds?

In addition to insider trading, the SEC has also brought cases against hedge funds based on charges related to:

  • False advertising and performance claims;
  • Overvaluing assets in order to charge excessive fees;
  • Benefitting favored investors at the expense of other investors; and
  • Using private fund assets for the personal benefits of the fund’s adviser.

I’ve read the cases and these were all firms with the telltale signs of a weak culture of compliance: off-the-shelf compliance manuals, little or no compliance testing, lack of risk assessment, etc.

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