How Far Can Hedge Fund Managers Go in Criticizing Public Companies?
Hedge Fund Law Report
Hedge fund managers that make public comments about companies can face legal and regulatory risks. Depending on the nature and scope of comments, regulators may determine that public comments by hedge fund managers may constitute market manipulation, which is prohibited by Section 9 of the Securities Act of 1933. In addition, the public companies discussed by hedge fund managers may file defamation lawsuits against such managers. This article discusses a recent court decision on the scope of permissible public statements by hedge fund managers about public companies. This article is particularly relevant to hedge fund managers whose funds hold short positions in public equity.