Fund managers must continually adapt to an evolving landscape as regulators become more aggressive in pursuing insider trading. See “How Can Hedge Fund Managers Apply the Law of Insider Trading to Address Hedge Fund Industry-Specific Insider Trading Risks? (Part Two of Two)
” (Aug. 15, 2013); and “When Does Talking to Corporate Insiders or Advisors Cross the Line Into Tipper or Tippee Liability Under the Misappropriation Theory of Insider Trading?
” (Jan. 10, 2013). The Hedge Fund Law Report recently spoke with Tom Hardin, the founder of Tipper X Advisors LLC, who provided his unique perspective on insider trading based on his experience as a former insider trader and one of the most prolific informants in securities fraud history. This second article in our two-part series presents Hardin’s insights on how fund managers should react to developments in insider trading enforcement, including changes in examination and enforcement methods; recent insider trading decisions such as U.S. v. Newman
and Salman v. U.S.
; the Trump administration’s pro-business, anti-regulation stance; and the recent performance of the hedge fund industry. The first article
explored how private fund compliance staff can prevent and detect insider trading activity, train employees, ensure prudent email use, prevent employees from rationalizing their insider trading and restructure employee compensation to avoid incentivizing risky behavior. For more on insider trading, see “ACA 2017 Fund Manager Compliance Survey Shows Continued SEC Focus on Compliance, Conflicts of Interest and Fees, and Illustrates Common Measures to Protect MNPI (Part One of Two)
” (Jun. 1, 2017); and “SEC Continues to Focus on Insider Trading and Fund Valuation
” (Jun. 30, 2016).