Growing SEC Enforcement of Hedge Fund Managers Requires Greater Focus on Cybersecurity and Financial Disclosure

The SEC is broadening its enforcement activities; it filed a record 807 enforcement actions for securities law violations and issued orders for $4.19 billion in penalties and disgorgements in fiscal year 2015, as acknowledged recently by SEC Chair Mary Jo White. A material subset of that activity was in the hedge fund and asset management space. See “SEC Chair’s Testimony Highlights SEC’s Bolstered Presence in Asset Management Space” (Jun. 16, 2016). Accordingly, it is vital for hedge fund managers to understand the practical consequences of the SEC’s enforcement approach, including its effect on market demand and the consequences of SEC action; the regulator’s investigative approach; and areas of scrutiny, including cybersecurity, market integrity and disclosure. These were a few of the topics discussed at the Ninth Annual Advanced Topics in Hedge Fund Practices: Manager and Investor Perspectives conference recently hosted by Morgan, Lewis & Bockius. This article highlights the key insights from several panels featuring partners Jedd Wider, Timothy Levin, Merri Jo Gillette, Amy Greer, Steven Hansen and Jennifer Klass. For additional coverage of the conference, see “How Can Private Fund Managers Grant Preferential Rights? Delaware Chancery Court Decision Stresses Need for Fund Document Integration” (Jun. 30, 2016). For additional insight from Morgan Lewis partners, see “Recent Developments Affect Classifications of Control Groups and Fiduciaries Under ERISA” (Apr. 14, 2016); and “Key Person Provisions in Hedge Fund Documents: Structure, Consequences and Demand From Institutional Investors” (Sep. 17, 2009).

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