Author Archives: Marissa

About Marissa

Marissa is a Partner and Vice President at HedgeOp Compliance, LLC. Before joining HegeOp in January 2005 as a Due Diligence Research Assistant, Marissa worked at Wave Hill as an Accounting Associate. She was responsible for handling accounts payable, processing financial statements and reconciling revenue and expense accounts. Marissa also worked as an intern at HedgeOp in the Summer of 2003. Marissa graduated with a B.S. in Business Administration with a concentration in Finance and Marketing from Fordham University in May of 2004. Marissa received the In Cursu Negotia Agendi Inter Gentes Award for International Business.

SEC Adopts Final Rules for Whistleblower Provisions under Dodd-Frank

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The U.S. Securities and Exchange Commission (the “SEC”) voted 3-2 on May 25, 2011 to adopt final rules implementing whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rule is called “Securities Whistleblower Incentives and Protection” which falls under Section 21F of the Securities and Exchange Act of 1934.

The new rule will require the SEC to pay an award, subject to certain limitations, to eligible whistleblowers who voluntarily provide the SEC with original information about a violation of federal securities laws that leads to successful enforcement of a covered judicial or administrative action, or a related action. Further, employers are prohibited to retaliate against employees that provide the SEC with information about possible violations.

Sweep Exams for Fund of Fund Advisers

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The Wall Street Journal is reporting that the SEC’s Office of Compliance Inspections and Examinations have identified (initially) about 12 fund of fund advisers that will be receiving a sweep audit request.  The scrutiny has involved firms that oversee $100 million to $15 billion in assets. The article notes that the SEC is examining whether firms that collect fees for funneling investors into hedge funds are properly overseeing investors’ money and dealing with potential conflicts of interest.

7 More Indicted to Galleon’s Insider Trading Case

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Seven more people were indicted yesterday in the insider trading case involving the Galleon Group and numerous other hedge fund traders, lawyers and corporate executives. The seven all-stars are:

  • Zvi Goffer – previously worked at Galleon and then founder of  his own hedge fund, Incremental Capital;
  • Arthur Cutillo – a former lawyer at Ropes & Gray LLP;
  • Jason Goldfarb – an associate at a New York law firm;
  • Craig Drimal – a trader who worked in Galleon’s office space but wasn’t employed by the firm,
  • Zvi’s Goffer’s brother Emanuel Goffer – worked at Incremental Capital;
  • Michael Kimelman -  worked at Incremental Capital; and
  • David Plate – worked at Incremental Capital.

Hedge Fund Net is reporting that the defendants (which also includes Raj Rajaratnam and Danielle Chiesi) collectively made at least $11 million for themselves and their firms off their trading on insider tips. The seven can add being charged with securities fraud and conspiracy to their resumes. If convicted, they can each get 20 years in prison for each count of securities fraud and up to 5 years in prison for each count of conspiracy. Until the outcome of their trials, the New York Times has reported that each of the above all-stars are free on bail and will enter pleas at their arraignments on February 2.

Still Picking up the Pieces

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Hedge Funds Review is reporting that the hedge fund industry posted its strongest gains since 1999.  However, a large portion of managers are unable to collect their performance fees and are relying on their management fees to pay their staff, as reported by the The Wall Street Journal.  It is reported that although the average hedge fund performance in 2009 was 20%, most hedge funds were still not able to collect their performance fees at the end of 2009.  Hedge Fund Research Inc. estimated that only about 31% of hedge funds were able to collect performance fees at the end of the fourth quarter. A majority of hedge fund managers were not able to surpass their high water marks at the end of 2009.

Further Relief from Lehman…?

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London based Lehman Brother International (Europe) (“LBIE”) has had more than $35 billion assets frozen as a result of their collapse last September.  Only 13.3 billion has been returned thus far. PricewaterhouseCoopers (“PWC”), Lehman ‘s administrator, is hoping to return an additional $11 billion to those affected hedge fund clients, without the need to post collateral or indemnify LBIE. PWC’s proposal was originally struck down by British courts, so they are hoping to get a 90% approval from its clients to approve the return of assets. Reuters reported that those hedge fund managers with frozen assets with LBIE will be receiving a proposal on Tuesday with PWC’s plan and will have until December 29th to vote. PWC is also hoping that if the plan is approved, to file claims at the end of February and return assets by the end of March.

It Runs in the Family for the Rajaratnams

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Raj Rajaratnam seems to have a lot in common with his brother, Rengan Rajaratnam. They have the same initials R.R., both have managed their own hedge funds and BOTH have been involved with investigations for insider trading.  Based on papers filed yesterday in New York federal court, Raj disclosed that he was deposed by federal authorities in 2007 in an insider-trading investigation involving “an unrelated hedge fund”, which was Sedna Capital Management and happened to be managed by the other R.R., Rengan Rajartnam as noted in an article in the Wall Street Journal.

Rengan managed Sedna Capital Management until late 2007, which is said to have been shut down after suffering losses and the costs of complying with the SEC investigation.  It appears that the Galleon Group was requested to provide documents (about four million of them) in conjunction with the 2007 SEC investigation of Sedna Capital Management. The Wall Street Journal article also states that the status on the investigation of Sedna Capital Management isn’t clear, but based on what we know about Raj, it is probably not good.

First Investor Relief from Madoff

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Massachusetts regulators ordered the first investor relief on Tuesday September 8, 2009. The complaint was filed by William F. Galvin, Massachusetts Secretary of State, on behalf of nearly a dozen investors in one of Madoff’s feeder funds. The Boston Globe is reporting that Fairfield Greenwich Advisors have settled with the investors for the original sum they placed, plus 6% annual interest. Fairfield will also have to pay the state oa $500,000 fine.