Articles By Topic
By Topic: Corporate Governance
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From Vol. 5 No.14 (Apr. 5, 2012)
Don Seymour Discusses Hedge Fund Governance and the Impact of the Recent SEC-CIMA Cooperation Arrangement on Hedge Fund Manager Examinations
On March 23, 2012, the U.S. Securities and Exchange Commission (SEC) announced that it had entered into a supervisory cooperation arrangement with the Cayman Islands Monetary Authority (CIMA). In its press release announcing the memorandum of understanding (MOU) embodying the supervisory cooperation arrangement, the SEC identified five categories of information that may be shared pursuant to the arrangement. Those five categories include information required to: (1) conduct routine supervision; (2) monitor risk concentrations; (3) identify emerging systemic risks; (4) better understand a globally active regulated entity’s compliance culture; and (5) conduct on-site examinations of registered entities located abroad. See “Is This an Inspection or an Investigation? The Blurring Line Between Examinations of and Enforcement Actions Against Private Fund Managers,” The Hedge Fund Law Report, Vol. 5, No. 13 (Mar. 29, 2012). Hedge fund managers, lawyers, compliance professionals and others have asked The Hedge Fund Law Report what this MOU means for their businesses. To help answer that question, we recently interviewed Don Seymour. Seymour is the founder and Managing Director of dms Management Ltd. (dms Management) and the former head of the Investment Services Division of the CIMA. At the CIMA, Seymour directed the authorization, supervision and enforcement of regulated mutual funds, including hedge funds, under the Mutual Funds Law of the Cayman Islands, and the supervision of company managers under the Cayman Companies Management Law. Seymour brought his CIMA experience to bear in explaining how the MOU will impact Cayman-domiciled hedge funds and their managers with respect to data collection and sharing, supervision, monitoring, examinations and regulatory coordination. Moreover, based on his service on the boards of several notable investment companies, Seymour offered insight on hedge fund governance issues, including: director independence; evolution in best corporate governance practices following the decision in Weavering Macro Fixed Income Fund Limited v. Stefan Peterson and Hans Ekstrom; valuation expertise required of fund directors; specific steps that directors can take to manage fund conflicts of interest; maximum number of directorships; and whether investors should have rights to appoint fund directors. This article includes the full transcript of our interview with Seymour.
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From Vol. 5 No.13 (Mar. 29, 2012)
Managing Risk in a Changing Environment: An Interview with Proskauer Partner Christopher Wells on Hedge Fund Governance, Liquidity Management, Transparency, Tax and Risk Management
The Hedge Fund Law Report recently interviewed Christopher M. Wells, a Partner at Proskauer Rose LLP and head of the firm’s Hedge Funds Group. Wells has decades of experience advising hedge funds and their managers, and a broad-based practice that touches on substantially every aspect of the hedge fund business. Our interview with Wells was similarly wide-ranging, covering topics including: hedge fund governance; investor demands for heightened transparency; co-investment opportunities; liquidity management issues; side pocketing policies and procedures; holdbacks of redemption proceeds; tax issues, including preparations for compliance with the Foreign Account Tax Compliance Act (FATCA) and the electronic delivery of Schedules K-1; and risk management, including practical steps to prevent style drift and unauthorized trading. This interview was conducted in conjunction with the Regulatory Compliance Association’s Spring 2012 Regulation & Risk Thought Leadership Symposium. That Symposium will be held on April 16, 2012 at the Pierre Hotel in New York. For more information, click here. To register, click here. (Subscribers to The Hedge Fund Law Report are eligible for discounted registration.) Wells is expected to participate in a session at that Symposium focusing on hedge fund governance and related issues.
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From Vol. 5 No.11 (Mar. 16, 2012)
Ernst & Young’s Arthur Tully Talks in Depth with The Hedge Fund Law Report About Hedge Fund Governance, Succession Planning, Valuation, Form PF and Administrator Shadowing
Ernst & Young’s (E&Y) recently published “Coming of Age: Global Hedge Fund Survey 2011” (Survey) highlighted a host of operational issues that hedge fund managers have recently grappled with, including issues related to corporate governance, succession planning and shadowing of fund administrators. See “Ernst & Young Survey Juxtaposes the Views of Hedge Fund Managers and Investors on Hedge Fund Succession Planning, Governance, Administration, Expense Pass-Throughs and Due Diligence,” The Hedge Fund Law Report, Vol. 5, No. 1 (Jan. 5, 2012). We recently interviewed Arthur Tully, the Co-Leader of E&Y’s Global Hedge Fund practice, on various topics covered by the Survey, including: issues related to valuation of investments; independent reconciliation of investment positions; reconciliation and documentation of differences in NAV calculations; independent administration considerations for UCITS funds; and how to gather the data necessary to complete Form PF. See “Hedge Fund Valuation Pitfalls and Best Practices: An Interview with Arthur Tully, Co-Leader of Ernst & Young’s Global Hedge Fund Practice,” The Hedge Fund Law Report, Vol. 5, No. 2 (Jan. 12, 2012). In this follow-up interview, Tully shares his insight and experience on additional topics of pressing importance to hedge fund managers, including best practices for hedge fund corporate governance; compensation structures for effective succession planning; valuation issues (including a discussion of the biggest mistakes made in valuing assets); project management in the Form PF context; and administrator shadowing (including common functions shadowed by hedge fund managers). This article contains the full text of our second interview with Tully. Tully is expected to expand on these and related topics during a session focusing on hedge fund governance at the Regulatory Compliance Association’s Spring 2012 Regulation & Risk Thought Leadership Symposium. That Symposium will be held on April 16, 2012 at the Pierre Hotel in New York. For more information, click here. To register, click here. (Subscribers to The Hedge Fund Law Report are eligible for discounted registration.)
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From Vol. 5 No.10 (Mar. 8, 2012)
Former SEC Commissioner Roel Campos Discusses Hedge Fund Governance with The Hedge Fund Law Report
While day-to-day control of a hedge fund is largely vested in the hedge fund’s manager, the relationship between manager and fund is marked by inherent conflicts of interest. See, e.g., “When and How Can Hedge Fund Managers Engage in Transactions with Their Hedge Funds?,” The Hedge Fund Law Report, Vol. 4, No. 45 (Dec. 15, 2011). Hedge fund investors generally look to three factors to mitigate those conflicts: law, practice and structuring. Legally, fiduciary duty and regulatory and private enforcement of securities laws are intended to mitigate conflicts. Practically, reputational considerations and basic canons of ethical behavior are expected to limit manager overreaching. And structurally, the boards of directors of certain hedge funds are intended to serve as a check on manager conflicts and other manager behavior contrary to the interests of investors. Prior to the credit crisis, investors looked primarily to the first two factors to police conflicts. After the credit crisis and the concomitant exposure of notable frauds, investors and regulators are paying increasing attention to the role of hedge fund boards as the investor’s internal advocate. In short, investors and regulators now expect directors to be informed, engaged and competent. This view was resoundingly echoed by the Grand Court of the Cayman Islands in the August 2011 Weavering Macro Fixed Income Fund Limited (In Liquidation) decision, in which the Grand Court found hedge fund directors personally liable for losses caused by their willful failure to supervise fund operations. See “Corporate Governance Best Practices for Cayman Islands Hedge Funds,” The Hedge Fund Law Report, Vol. 5, No. 3 (Jan. 19, 2012). It is one thing to say that hedge fund directors need to be more informed, engaged and competent. It is another thing altogether to define with specificity what these concepts mean in practice. In an effort to do so, a session at the Regulatory Compliance Association’s Spring 2012 Regulation & Risk Thought Leadership Symposium will focus on hedge fund governance. That Symposium will be held on April 16, 2012 at the Pierre Hotel in New York. For more information, click here. To register, click here. (Subscribers to The Hedge Fund Law Report are eligible for discounted registration.) As part and parcel of the RCA’s effort to define with specificity the role of hedge fund directors, The Hedge Fund Law Report recently interviewed Roel Campos, one of the anticipated participants in the fund governance session, a former SEC Commissioner and a current Partner at Locke Lord LLP. Campos’ high-level SEC experience gives him particularly useful insight into regulatory expectations with respect to hedge fund directors; and his regulatory experience is complemented by private legal practice and corporate experience. Campos, accordingly, has a uniquely well-rounded view of what hedge fund directors should do, and the practical constraints on what they can do. Our interview focused on: the key purposes and goals of hedge fund boards; how hedge funds can make their boards more effective and accountable; what constitutes an “independent” director; the role to be played by hedge fund boards in the valuation of assets and implementation of risk management policies; the maximum number of boards on which one director can serve; whether investors should talk to hedge fund boards during the due diligence process; and whether hedge funds should conduct background checks on prospective directors. This article contains the full transcript of our interview with Campos.
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From Vol. 5 No.5 (Feb. 2, 2012)
The Changing Face of Alternative Asset Management in Switzerland
Switzerland is the third largest global centre of alternative asset management, after North America and the United Kingdom. Around three times the size of Connecticut, the small, central European country boasts approximately 15% of global assets under management. In a guest article, Matthew Feargrieve, leader of the Funds and Investment Services practice in the London and Zurich offices of Appleby, examines the composition of the Swiss alternative asset management market, focusing on single managers and managers of funds of hedge funds (FoHFs); reviews the current and prospective regulatory environment in Switzerland for each type of manager; and assesses the country’s future generally as a centre of alternative asset management against the backdrop of economic austerity and regulatory zeal in Europe.
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From Vol. 5 No.3 (Jan. 19, 2012)
Corporate Governance Best Practices for Cayman Islands Hedge Funds
With the financial crisis of 2008 and 2009, corporate governance practices in the global alternative investment funds industry came under the microscope. While investor views on how fund directors performed during the crisis vary, what is clear a few years on is that investors, hedge fund managers and service providers have a much better understanding of the role of an independent non-executive director of an alternative investment fund and that a best practice framework has started to become a topic for active discussion in the industry. As a result, hedge fund investors – particularly institutional investors – are increasingly scrutinizing a fund’s corporate governance structure to ensure that the directors are diligently and skillfully performing their duties in the best interest of the hedge funds on whose boards they serve. With the global hedge fund industry having its largest presence in the Cayman Islands, this guest article looks at some of the issues relating to corporate governance from the Cayman fund perspective. The authors of this guest article are Tim Frawley, a Partner in the Investment Funds practice of Maples and Calder, and Peter Huber, Global Co-Head of Maples Fiduciary Services. Frawley and Huber begin with a historical accounting of Cayman company fund governance. The authors then explain the various duties owed and roles performed by fund directors. Next, the authors discuss the findings and implications from the Weavering Macro Fixed Income Fund Limited (In Liquidation) decision handed down last year. The authors then move to a survey of some current hot-button issues related to fund governance, and conclude with a discussion of anticipated fund governance challenges facing hedge fund managers.
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From Vol. 4 No.42 (Nov. 23, 2011)
Speakers at Walkers Fundamentals Hedge Fund Seminar Provide Update on Hedge Fund Terms, Governance Issues and Regulatory Developments Impacting Offshore Hedge Funds
On November 8, 2011, international law firm Walkers Global (Walkers) held its Walkers Fundamentals Hedge Fund Seminar in New York City. Speakers at this event addressed various topics of current relevance to the hedge fund industry, including: recent trends in offshore hedge fund structures; hedge fund fees and fee negotiations; fund lock-ups; fund-level and investor-level gates; fund wind-down petitions and the appointment of fund liquidators; corporate governance issues; D&O insurance; fund manager concerns with Form PF; and offshore regulatory developments, such as proposed legislation requiring registration of certain master funds in the Cayman Islands, the EU’s Alternative Investment Fund Manager (AIFM) Directive and the British Virgin Islands (BVI) Securities & Investment Business Act (SIBA). This article summarizes the key points discussed at the conference relating to each of the foregoing topics and others.
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From Vol. 1 No.13 (May 30, 2008)
Asian Corporate Governance Association Publishes White Paper Critiquing Corporate Governance in Japan
Asian Corporate Governance Association published a white paper calling for an overhaul of Japanese corporate governance, just as hedge fund TCI’s fight for greater control of J-Power heats up.
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