Hedge Fund Service Professionals Do Not Owe Fiduciary Duty to Investors But May be Subject to Liability for Aider and Abettor Claims if Provided by State Statute

  • State appeals court dismissed hedge fund investors’ $200 million lawsuit against fund’s outside counsel for lack of any fiduciary duty owed to investors.
  • State appeals court ruled that preparation of offering memo not a representation, fraudulent or otherwise, to investors.
  • Oregon investor who invested and lost $2.75 million in the fund and filed a separate federal fraud case survived outside counsel’s motion to dismiss because Oregon law grants private right of action against aiders and abettors.
  • Federal case particularly significant because aider and abettor claims against lawyers or accountants in securities fraud cases generally barred under federal law, under recent Stoneridge Supreme Court case.

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