Nov. 12, 2008

Finally, Some Good News for Private Fund Placement Agents

Private fund managers who are registered investment advisers may now have greater flexibility in entering into and disclosing arrangements with finders who solicit and refer prospective fund investors. However, that flexibility is dependent upon the finder solely soliciting for a private fund rather than for other investment arrangements (such as managed accounts) that the manager may offer. In a guest article, Debevoise & Plimpton partner Kenneth J. Berman analyzes the recently-issued SEC staff interpretive letter clarifying the application of the cash solicitation fee rule under the Investment Advisers Act of 1940.

CFTC Approves New National Futures Association Rules Mandating Forex-Specific Risk Disclosure Statement, Periodic Account Statements and Annual Reports

The Commodity Futures Trading Commission has approved new National Futures Association Compliance Rules 2-41 and 2-42, effective November 30, 2008. The new rules change the disclosure and reporting regimes for hedge funds and others that trade foreign exchange – we explain how.

FASB’s Proposed Changes to Hedge and Derivative Accounting Rules Draw Strong Criticism

The Financial Accounting Standards Board’s ambitious initiative to introduce changes to hedge and derivative accounting rules has met with widespread skepticism and bewilderment from market players.  We analyze the status and likely future course of the initiative, based on a review of all comments received by the FASB on its June 6, 2008 Exposure Draft and interviews with affected market participants.

Petters’ Fraud Underlines Need for Vigilant Due Diligence

Several hedge funds have been caught in a large-scale fraud alleged against Tom Petters, former CEO of Petters Companies Inc.  Based on a review of court filings and interviews with managers and attorneys at or representing funds who declined investments in Petters Co., we offer specific suggestions on how hedge funds can approach pre- and post-investment due diligence to avoid getting caught in fraudulent situations.

Statute of Limitations Bars Market Timing and Late Trading Claims Against Hedge Fund

On September 29, 2008, a federal district court in New York dismissed, on statute of limitations grounds, claims brought by GVA Market Neutral Master Limited against entities associated with Veras Investment Partners, LLC.  Our coverage illustrates how statutes of limitations affect lawsuits by and against hedge funds.

Schulte Roth & Zabel Expands Fund Practice in UK with Addition of Nick Terras

Schulte Roth & Zabel International LLP announced on November 3, 2008 that Nick Terras, a leading fund and structured finance lawyer, has joined the firm in London as a partner in the Investment Management Group.

Managed Funds Association Hires Stuart J. Kaswell as Executive Vice President and General Counsel

On November 3, 2008, Managed Funds Association (MFA), the leading trade association of the hedge fund industry, announced that Stuart J. Kaswell has been named executive vice president and general counsel, effective December 1, 2008.

“M&A Titans: The Pioneers Who Shaped Wall Street’s Mergers and Acquisitions Industry,” by Brett Cole; John Wiley & Sons, 226 pages

Brett Cole is a correspondent for The Economist.  In an earlier role, from 2003 to 2007, he covered Wall Street for Bloomberg News. His new book is the story of the “fourth wave” of mergers-and-acquisitions activity in U.S. financial history, an era that in his view “created and shaped what people recognize as a merger industry on Wall Street,” as well as the expectations that the relevant portion of the legal profession brings to the table.

Misattribution in October 10, 2008 Issue

In an article in our October 10, 2008 issue, on the topic of high water marks, we referred to a memorable and insightful quote from Reid Bernstein that was featured in a September 2, 2008 article in The Wall Street Journal.  That quote, as true now as it was two months ago, was: “Down is down and as the saying goes, you can’t eat relative returns.”  Mr. Bernstein is head of OneCapital Management Partners, a New York firm that invests in hedge funds.  Our article incorrectly referred to Mr. Bernstein as Brian Epstein.