U.K. Appellate Court Holds That Hedge Fund Manager Employees May Be Personally Liable for Unreasonably Relying on the Representations of a Hedge Fund Manager Principal Regarding Performance and Portfolio Composition
Hedge Fund Law Report
The best hedge fund managers are often great salespeople, and a good bit of their sales efforts are often directed internally – in particular, at persuading non-investment professionals to buy into their view of the world. This is fine so long as that view is compelling and legitimate. But this becomes problematic for all involved when that view is fraudulent. A recent U.K. appellate court decision indicates that employees of hedge fund managers may be liable in cases where they accept at face value – and relay to third parties – representations from a manager principal that they knew or should have known to be false. “He told me so” is not a valid defense to a suit for negligence; and employees with limited authority can be hit with effectively unlimited liability.