Full Text of FINRA Rule 5131 The following is the full version of FINRA Rule 5131 effective as of September 26, 2011.  This rule, in conjunction with FINRA Rule 5130, governs the manner in which investors may participate in New Issues.  Specifically, Rule 5131 prevents “spinning” which is the practice [...]

SRO for Private Fund Adviser could be established, but not without challenges Over the last few weeks we have heard much talk about the potential formation of a self-regulatory organization (“SRO”) for registered investment advisers (i.e. hedge fund managers). In July the U.S. Government Accountability Office (“GAO”) released a report [...]

Compliance Requirements of the SEC Custody Rule Hedge fund managers are preparing to register as investment advisers with the SEC pursuant to the new Dodd-Frank registration requirements.  One of the issues which managers will be dealing with during that process is the hedge fund custody rule (Rule 206(4)-2 under the Investment [...]

From time to time on this site we discuss the custody rule for SEC registered hedge fund managers.  Below we have reprinted the entire regulation. **** Rule 206(4)-2 –Custody of Funds or Securities of Clients by Investment Advisers a. Safekeeping required. If you are an investment adviser registered or required [...]

President Obama Proposes Taxing Carried Interest as Ordinary Income Every couple of years there are various proposals floated around congress to tax the hedge fund performance fee (or “carried interest”) as ordinary income (see a previous post on this topic from 2009 here).  This week President Obama announced a proposal to [...]

Compliance Guide for New Hedge Fund Managers Like any new business a hedge fund manager must comply with state and local ordinances, and make local business filings.  However, when launching a hedge fund, a manager may become so consumed with preparing launch documents, opening prime brokerage accounts and, most importantly, [...]

The hedge fund subscription process (i.e. placing investor money into the fund’s brokerage account for investment) is a basic process that may be slightly different for each fund based on a number of factors.  Managers should make sure they understand the subscription process because investors may ask questions about the [...]

Insider Trading Remains Popular Topic in Hedge Fund Regulation Insider trading by hedge funds and the use of expert networks has been a hot compliance topic in 2010 and 2011. The topic remains in the spotlight as Massachusetts recently passed new expert network regulations. Under the new regulations, registered investment advisers [...]

Bill Would Have Significant Impact on Private Funds On July 12, 2011, United States Senator Carl Levin (D – Michigan) introduced the Stop Tax Haven Abuse Act of 2011 (the “Bill”). A prior version of the Bill was introduced in 2009. The Bill contains several provisions of interest to private [...]

Small Business Capital Access and Job Preservation Act Moves Toward Vote The SEC recently finalized the new investment adviser registration regulations and under those regulations private equity fund managers will be required to be registered with the SEC.  However, Congress has recently been taking steps that may ultimately mean that [...]