Head of Asset Management Unit at SEC Enforcement Shares Hedge Fund Enforcement Priorities

In a recent speech, Bruce Karpati, Chief of the Asset Management Unit (AMU)within the Division of Enforcement (Division) of the U.S. Securities and Exchange Commission (SEC), discussed his view of the current enforcement priorities of the Division, in general, and the AMU, in particular, in relation to hedge funds. The AMU’s current key enforcement priorities for hedge funds include:

Valuation manipulation;

Self dealing;

Preferential treatment for certain investors; and

Misleading marketing.

The AMU is particularly focused on these potential abuses in relation to hedge funds, based on its view that hedge funds are more likely to invest in complex and illiquid assets and have less transparent organizational structures than registered funds. Mr. Karpati also indicated that the heightened scrutiny of hedge funds is attributable to the growing number of retail investors who are indirectly exposed to hedge funds via pension plans, retirement plans and similar pooled accounts, as well as the expectation that the Jumpstart Our Business Startups Act (JOBS Act) will only increase retail investors’ exposure to hedge funds. The following summarizes Mr. Karpati’s remarks.

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Topics:  Asset Management, Enforcement, Fiduciary Duty, Hedge Funds, Marketing, Pensions, Retail Market, SEC

Published In: Administrative Agency Updates, Finance & Banking Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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