Hedge funds should brace themselves for aggressive SEC, experts warn

Date: Friday, February 3, 2012
Author: Owen Dowson, COO Connect

Hedge funds should brace themselves for an increasingly aggressive and alert Securities and Exchange Commission (SEC), it has been warned.

Registration and Form PF (Private Fund) reporting requirements will enable the SEC to have greater oversight of hedge fund operations. “Reporting requirements will make the industry more transparent and the SEC will therefore now have more information about hedge fund portfolio positions than they did previously,” said Patrick Shea, managing director of HedgeOp Compliance in New York.

Earlier this month, the SEC charged several hedge fund managers and analysts including Level Global Investors with insider trading. The charges to relate $78 million in illicit profits accrued from trading shares in Dell Computers and Nvidia Corporation. On January 23, Diamondback paid $9 million to settle the allegations.

“The SEC is not only becoming more vigilant, but it has also upgraded its procedures and systems to test performance. The SEC’s staff is also able to better track suspicious trading activity through market surveillance and the various reports presently filed and to be filed under new regulations,” commented Holland West, partner at international law firm Dechert.

Despite Congress squabbling over regulatory budgets, it is unlikely fraud investigations will be hit by the proposed cutbacks. “No politician wants to be seen as being weak on financial regulation and oversight,” said Shea.