As the Pace of Enforcement Activity Quickens, Hedge Fund Managers Refocus on the Law and Technology of Data Storage
Hedge Fund Law Report
With the dramatic expansion of the range and ease of communication technologies has come an expansion of the channels through which inside information and other illegal or inappropriate information may pass. For hedge fund manager chief compliance officers and others at hedge fund managers tasked with enforcing insider trading and other laws, the proliferation of communication technologies has made life both harder and easier: harder because there is a greater volume of information to monitor, and easier because the technology for monitoring has never been more accessible. In addition, the cost of storage of data and documents has fallen precipitously, causing expectations to rise on the part of regulators and prosecutors with respect to the volume and duration of storage. This article examines data retention issues in the hedge fund context. In particular, the article discusses: the relevant statutes and guidelines with respect to data storage; the law on spoliation of evidence; adverse inference instructions; how spoliation and adverse inference considerations may apply in the context of employees that leave a firm to set up a competitor; treatment of data storage in hedge fund manager compliance manuals; and employee training with respect to data storage.