SEC Subpoenas Hedge Fund in Connection With Suspected Rumormongering

In recent weeks, the SEC has subpoenaed more than 50 hedge fund advisers, seeking communications relating to their involvement in circulating false rumors intended to drive down the share prices of certain financial companies. According to some experts interviewed by the Hedge Fund Law Report, the SEC’s rumormongering investigation is unlikely to disrupt business as usual in the $2.5trillion hedge fund industry. Others, however, see the investigation as an effort by the agency to exert new powers over hedge funds. In any case, the SEC’s investigation has rekindled the long-running debate in the hedge fund legal community about how to determine when rumors fall on this or that side of anti-market manipulation laws and rules.

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