Mar 10

The IRS has provided welcome relief to U.S. investors from the Foreign Bank Account Reporting (”FBAR”) requirement to report large holdings in offshore private funds held in 2009.

Specifically, in a notice issued on February 26, 2010, the IRS said that investors in offshore hedge funds, private equity funds and venture capital funds  do not have to file FBAR reports for foreign accounts held during 2009.

Read the rest of this entry »

Mar 3

According to Reuters today, the SEC is planning on beefing up its New York office staff by about 8% this year, partly to focus more efforts on regulating the NY hedge fund industry:

The agency plans to hire 18 people on the enforcement side, where it currently employs about 150 people in New York, and add 15 people to its examinations staff, which currently numbers about 210 in New York, Mr. Canellos said at the Reuters Private Equity and Hedge Funds Summit in New York.

The push to hire more lawyers, accountants and even former traders comes at a time that the agency is seeking to become more aggressive in going after the bad guys on Wall Street.

This comes on the heels of comments made by Bruce Karpati, the co-chief of the SEC’s asset management unit, pushing for hedge fund registration.   Mr. Karpati is hoping for more disclosures by hedge fund managers and stated at a recent conference:

“When you have more (hedge fund advisers) that are registered, we will have more access to information,”

As congress makes slow progress on its regulatory reform bill, the SEC is clearly gearing up for the expected registration of hedge fund managers.

Mar 3

News from other other side of the globe …

Not to long after the SEC announced its new regulations on short sales, we have learned that the Securities and Futures Commission of Hong Kong (the “SFC”) that it will be introducing a short-position reporting regime to enhance transparency of short selling activities in Hong Kong.   There is little doubt that this stems from industry feedback and the SFC’s view of the current domestic market situation.

The SFC’s CEO, Mr. Martin Wheatley, claims that the “build-up of large short positions may be potentially disruptive to market stability” and that this “short-position reporting regime will not only complement Hong Kong’s robust short-selling regulatory framework but will also provide a more complete picture of short-selling activities in our market.”

Under the proposed regime, the reporting obligation will be triggered if a short position is equal to or exceeds, 0.02% of the issued share capital of a listed company, or a market value of $30 million, whichever is lower. Weekly reports must be submitted to the SFC until the short position falls below both trigger levels. The SFC will publish aggregated short positions of each stock on an anonymous basis a week later.

Managers should particulary note that only the constituent stocks of the Hang Seng Index, the H-shares Index, financial stocks and other stocks specified by the SFC will come under this new reporting regime.  Derivatives will not be included.

Feb 17

As SEC chairman, Schapiro pledged to quickly pursue new limits on short selling. In April, just two months after she took the job, the agency unveiled a proposal to crack down on the practice.

But more than a year after Schapiro took office, the SEC has not yet written into the Wall Street rulebook the short-selling limits — or most of the other measures that the agency has proposed to more tightly regulate the financial system. According to the Washington Post, whether Schapiro can achieve more of her reform agenda will be a test of how much she can change the SEC, which gained a reputation as a weak Wall Street regulator in the years leading up to the financial crisis………

Feb 9

According to a report from the Financial Times, Paulson & Co, a hedge fund that made billions of dollars betting against subprime mortgages, has received a request for information from the Securities and Exchange Commission in connection with an investigation into complex securities at the heart of the financial crisis, according to people familiar with the matter. In the months prior to the real estate crash, which pre-empted the global economic volatility, the company made $15 billion from investments in subprime deals.

Feb 8

As discussed on Dealbreaker, reports say that Boston-based Loch Capital Management has been “hit hard” by redemptions since the friend, Steven Fortuna, of founders (and bros) Timothy and Todd McSweeney pleaded guilty to insider trading, and agreed to cooperate with the government. Reuters is reporting that neither brother has been implicated in the Galleon investigation, in the clubby world of Boston’s hedge fund community, speculation has been swirling around the firm.

Jan 30

HedgeOp Compliance, LLC will be holding a free webinar on March 24th on: “Conducting an Annual Compliance Review.”

This seminar will look at HedgeOp’s suggested method for conducting an annual review including: review of compliance inventory items, conflicts of interest of review, use of employee and service provider questionnaires and more.  Please note that this seminar is not only geared towards SEC-registered managers, but also unregistered managers looking to conduct an annual compliance review as a form of “best practice.”

You can view more information and register for the event here.

Jan 22

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.

Jan 20

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.

Jan 12

The SEC has announced that Carlo V. di Florio has been named Director of the agency’s Office of Compliance Inspections and Examinations (OCIE). Di Florio was previously a partner in the Financial Services Regulatory Practice at PricewaterhouseCoopers where he “played a leading role in strengthening the corporate governance, risk management and regulatory compliance practice.”

He has also played a “leading role in numerous high-profile engagements where PricewaterhouseCoopers was retained to investigate corporate fraud, corruption, conflicts of interest and money laundering.”

Read More Here.

« Previous Entries