Dec. 16, 2008

The Freedom of Information Act: A Crack in the Confidentiality of Disclosed Short Sale Data?

The SEC’s temporary rule requiring certain institutional investment managers to file weekly reports disclosing their short sales and short positions has raised concern among affected parties, especially hedge funds, that public disclosure of this information may undermine trading strategies.  Hedge funds have taken some comfort in a move by the SEC to limit the rule so that disclosure only goes to the agency, and not to the public.  But there may be an exception to the no-public-disclosure rule that can undermine managers’ confidence in the confidentiality of disclosed short information: requests under the Freedom of Information Act.  We explain the application of the Freedom of Information Act in the short sale reporting context.

Federal Court Bars Investors’ Claims Against Hedge Fund Administrator

Hedge fund investors sued hedge funds’ prime broker and custodian, their former administrator and their former auditor for fraud, alleging that that the defendants should have known that the funds’ manager was actively engaged in fraud, and that the defendants should have warned plaintiff investors.  We detail the precise allegations, the applicable legal standards, the outcome and the potential implications of the case for future investor suits against third party hedge fund service providers.

Additional Hedge Fund Regulation: What, not Whether

Vows on Capitol Hill to increase scrutiny of hedge funds have flared and just as quickly disappeared in recent years.  But now the faltering economy, combined with Democratic dominance in the November elections and unceasing news since of devastating blows to individual and institutional investors, have produced a decidedly different climate in Washington.  In a series of interviews, hedge fund attorneys and scholars told the Hedge Fund Law Report that the discussion has moved past the inevitability of increased federal monitoring of the hedge fund industry to more specifics about some of the possible regulatory steps.  We detail the current climate on Capitol Hill with respect to hedge fund regulation.

Hedge Funds Using Technology to Control Access to Fund Data

With declining performance, the pendulum of bargaining power has swung back in favor of investors.  Investors have demanded more information, and hedge fund managers have obliged.  However, as proprietary information has been leaked to the press and possibly competing fund managers, managers have been looking for ways to restrict the circulation of such information while still satisfying investor demands for the data.   Just as technology has created a wider range of issues relating to information management, it has also provided solutions.  In particular, digital rights management programs enable fund managers to restrict the circulation of and control access to fund information.  We explain the relevant technology, costs and its interaction with hedge fund compliance functions.