Hedge funds are facing a blistering pace of legal and regulatory change, as well as unprecedented scrutiny from regulators and investors. Our hedge fund practice is comprised of former regulators, enforcement lawyers, and in-house counsel who closely track, and guide clients through, this evolving regulatory, compliance, and enforcement landscape. We understand government regulatory and enforcement priorities because we served in senior positions in the SEC’s Enforcement and Trading and Markets Divisions and the DOJ’s Criminal Fraud Section. We understand hedge fund priorities because we worked in major Wall Street financial institutions and on the trading desk of a prominent hedge fund. We leverage those experiences, and our firm’s entrepreneurial and business-savvy culture, to problem solve for hedge funds in a variety of legal situations.
Regulatory & Compliance
We partner with clients to develop and implement streamlined, practical solutions to the increasingly complex regulatory environment, from formation to day-to-day operations, including:
Outside general counsel: We advise hedge fund advisers on almost all day-to-day legal issues that arise, from review and negotiation of commercial contracts to routine employment matters.
Formation: We craft customized, market friendly organizational and offering documentation that focuses on managing litigation and enforcement risk.
Registration: We guide hedge funds through the investment adviser registration process at the federal and state levels. We draft and revise registration documentation for clarity, consistency, and risk control.
Compliance: We provide continuous regulatory and compliance counseling in securities, commodities, and other laws applicable to a hedge fund’s trading and investment functions. We provide timely, market-oriented compliance counseling in an array of areas, including:
- Insider trading compliance, including research due diligence, trading restrictions and best practices
- Product and line-of-business compliance
- Compliance program structuring
- Offering and marketing compliance, including Regulation D, broker-dealer exemption and marketing materials review
- Trading compliance, including Regulation SHO, Rule 105, trade errors, trade allocation and market manipulation
- Activist investing, including mergers & acquisitions and Form 13D
- Reputational and fiduciary issues, including soft dollars, gifts & entertainment and anti-money laundering, “pay to play” and FCPA
- Forms, including 13D, 13G, 13F, CFTC large trader and Form PF reporting
Compliance Procedures: We help hedge funds craft and implement customized, practical compliance policies and procedures. We draft compliance procedures from the perspective of how the industry actually works and how the regulators and investors examine and evaluate hedge funds.
Annual Compliance Reviews: We conduct annual and special compliance reviews for hedge fund adviser firms to satisfy Investment Advisers Act requirements and other purposes. Our rates are competitive with those of major compliance firms.
Regulators have ratcheted up scrutiny of hedge funds, particularly in the areas of conflicts of interest, the Foreign Corrupt Practices Act, insider trading, and research practices. We represent clients in all phases of informal inquiries, formal investigations, and litigation. We understand the real-world risks posed by just the existence of an enforcement investigation, and are skilled at helping hedge funds successfully communicate with regulators and investors. Clients benefit from our deep bench of enforcement lawyers, all of whom have worked at the SEC or DOJ. We have numerous “wins” in cases where we successfully resolved government investigations before any proceedings were brought. When necessary, we defend our clients vigorously and efficiently.
- Represented numerous hedge fund managers and individuals in insider trading investigations.
- Represented a securities trader in an SEC investigation of asset-backed securities trading activities.
- Represented a hedge fund manager in an SEC investigation of “cherry picking.”
- Represented a hedge fund manager in a gifts and entertainment investigation.
- Represented a hedge fund manager and a portfolio manager in a Rule 105 SEC investigation.
Our lawyers have successfully represented hedge funds in affirmative and defensive litigation in state and federal courts, including securities and derivative actions, partnership disputes, and common law fraud and breach of contract matters. We also have represented funds facing threatened or actual litigation on issues arising from distressed debt investments and lender liability issues.
- Defended a global investment management firm in a two and one-half week jury trial. Obtained the complete dismissal of all claims totaling approximately $100 million, and obtained all requested affirmative relief, including damages and legal fees.
- Prosecuted an action on behalf of a privately-owned hedge fund sponsor. Obtained summary judgment on liability within four months of commencing the action, and obtained all requested relief, including damages and legal fees, after a bench trial on damages.
- Defended a hedge fund serving as collateral manager of a CDO in an action brought by a CDO investor alleging common law and statutory (consumer protection) claims. Obtained the dismissal of several common law claims and the consumer protection claims. The case settled for less than the cost of defense.