Jun. 19, 2008

District Court Holds that Long Party to Total Return Equity Swap May be Deemed to Have Beneficial Ownership of Hedge Shares Held by Swap Counterparty

In a case of first impression, with potentially important consequences for activist hedge funds, the US District Court for the Southern District of New York ruled on June 11, 2008 that two hedge funds that had accumulated substantial economic positions in publicly-traded railroad operator CSX Corporation, principally via cash-settled total return equity swaps, were deemed to have beneficial ownership of the hedge shares held by their swap counterparties.

New York Supreme Court Holds that Ninety Percent Loss in Hedge Fund’s Value Put Investors On Notice of Potential Fraud

On January 17, 2008, the New York Supreme Court granted a fund manager’s motion to dismiss investors’ fraud and other claims brought in April 2007, holding that a 90% drop in the fund’s value put the investors on notice of the fraud by September 2002 and the applicable statute of limitations expired two years following the date on which the investors knew or should have discovered the fraud.

Federal District Court Invalidates Purported Terminations of Credit Default Swaps by Bond Insurer

On June 11, 2008, in a one-page order, the US District Court for the Southern District of New York ruled that Merrill Lynch International did not repudiate its obligations under seven credit default swaps with affiliates of bond insurer XL Capital Assurance Inc. with a notional value of $3.1 billion, and that XL’s purported terminations of those credit default swaps were without effect.

Working Paper Analyzes India’s Approach to Hedge Fund Regulation

A recent working paper analyzes various strategies that have been adopted by the Securities and Exchange Board of India in regulating the hedge fund industry, and examines in detail their advantages and disadvantages.

Cayman Islands Monetary Authority Issues Report on Hedge Fund Statistics

Earlier this month, the Cayman Islands Monetary Authority issued the first annual Investments Statistical Digest containing statistics on 5,052 Cayman-domiciled hedge funds.

Cadwalader Adds Greg Patti to Private Equity Team to Broaden Healthcare and Telecom Sector Expertise

On June 2, 2008, international law firm Cadwalader, Wickersham & Taft LLP announced that Gregory P. Patti, Jr. will join the firm as a partner in the Corporate Department of the New York office.