Browsing: Regulatory Environment

Hedge fund regulation, UCITS, Court Rulings, Regulatory developments

Regulatory Environment

Accounting for the Unreported Dead: A Matter of Opinion

Oct 20th, 2015 | Filed under: Regulatory Environment, Legislation/Court rulings

The Supreme Court announced this March that opinions that turn out to be wrong aren't enough to make out a claim for securities fraud. The twist in the Westland case was that it turned on the proper accounting treatment of reserves for death benefits that have been incurred but not reported. Read More


Is it my imagination, or is the U.S. SEC cracking down on fund managers? (Video)

Oct 19th, 2015 | Filed under: Regulatory, Hedge Funds

Since the financial crises of 2008-09, regulation of financial firms has increased significantly. Recently the SEC has stepped up its enforcement actions and commensurate fines. What does this mean for managers and the cost of generating alpha?Read More


Merger Arb: News from Delaware’s Chancery Court

Oct 13th, 2015 | Filed under: Regulatory, Hedge Funds, Relative Value Hedge Funds

The court in Delaware clearly doesn’t believe that eliciting certain undramatic tidbits of news as supplemental disclosures is enough to earn plaintiffs’ attorneys their fees. Vice Chancellor Laster in particular has, in his own words, “been giving these [cases] a hard look for a while now,” and with Aruba the court puts its foot down. Read More


Is the FTC loosening its choke-hold on the mergers?

Oct 8th, 2015 | Filed under: Regulatory, Regulatory Environment, Business News

After a hard look at the evidence, Judge Polster couldn't say that the FTC was likely to prevail after a full hearing on its objection to the merger of two medical-equipment sterilizers, so he denied the preliminary injunction. Why this matters. Read More


New Mutual-Fund Industry Whistle Blower Case

Sep 28th, 2015 | Filed under: Regulatory Environment, Business News

We will certainly hear more of this whistle blower case, because it isn’t at all clear whether there is majority support on the U.S. Supreme Court for the interpretation of Lawson in which the district court is engaged in Anthony. Read More


The Taxation of Carried Interest: A New Republican Idea

Sep 20th, 2015 | Filed under: Regulatory Environment, Business News

When Tapper brought the hedge fund taxation question directly to Mr. Trump, Trump replied that he was still working on the details, but that when his full plan is released "the hedge fund guys won't like me as much as they like me right now." Why that is the perfect Trumpian sentence. Read More


A Curtain Opener for the Australia Forum

Sep 13th, 2015 | Filed under: Performance, Analytics & Metrics, Hedge Fund Regulation, Alternative Beta & Hedge Fund Replication

Paul Chadwick, chairman of AIMA Australia, says that the hedge fund industry in Australia is at an "inflection point." Faille reflects on that ubiquitous expression, and then turns to Australia's new Investment Manager Regime. Read More


Supreme Court Decisions: Post-Announcement Hours & Days

Sep 10th, 2015 | Filed under: CAPM / Alpha Theory, Hedge Fund Strategies, Alpha Hunters, Alpha Strategies, Legislation/Court rulings, Alpha Seekers

Presumably the U.S. Supreme Court's decision, in December 2008, that states can in fact make and enforce tougher labeling standards for cigarettes than does the federal government was a negative for tobacco stocks. But did that mean that stock prices had already anticipated the decision before it happened? or that they immediately adjusted downward on the morning the decision was announced? Or ... neither of those? Read More


Javert Frustrated Again: This Time in the Second Circuit

Sep 8th, 2015 | Filed under: Insolvency, Emerging markets, Legislation/Court rulings

NML tried to get around the sovereign immunity of Argentina's Central Bank by arguing that it and the Republic were only one entity (the "alter ego" theory developed by the U.S. Supreme Court in an opinion concerning Cuba, in the 1980s), and that the one entity involved has waived its/their immunity. No dice. Read More


The Enablers of the Fraudsters, Part I

Sep 1st, 2015 | Filed under: Regulatory, Insolvency

A new lawsuit against the corporate and individual enablers of a securities fraudster moves forward. The former are "alleged" enablers, but the latter is a convicted fraudster, already serving his time. Faille seeks to draw lessons. Part One of Two. Read More


Administration, via Verrelli, Rolls the Dice on Insider Trading Issue

Aug 31st, 2015 | Filed under: Hedge Fund Strategies, Alpha Hunters, Legislation/Court rulings

Not all benefits are as tangible as a suitcase of cash, and the question of law for the Second Circuit, for the Ninth, and now perhaps for SCOTUS is: is friendship enough? how about regard for one's brother? Read More


When Underfunded Pension Funds Take Up Social Responsibility Investing

Aug 24th, 2015 | Filed under: Institutional Investing, Socially responsible investing, Legislation/Court rulings

In November 2014, Scott Stringer, New York City's Comptroller, launched a campaign he called the Boardroom Accountability Project. Bernard Sharfman makes a case that this BAP is a good example of much that is wrong with institutional/activist investing today. Read More


Weintraub of GFT: Basel III Coming Into Force by Increments

Aug 20th, 2015 | Filed under: Hedge Fund Industry Trends, Risk management, Regulatory, Asset allocation

Faille spoke recently to Herman Weintraub, executive director and head of alternative investment practices at GFT, about the impact of the Basel III rule changes upon the HF industry. Weintraub says, one ought to look not at the parts, but at the whole. Read More


SEC’s Daniel Gallagher: Friend of the Beleaguered CCO

Aug 10th, 2015 | Filed under: Hedge Fund Regulation, Risk management, Regulatory

Commissioner Gallagher contends that some recent enforcement actions "have unfairly contorted the rule to treat the compliance function as a new business line," thus giving compliance officers the unwelcome role of business heads. In this and other respects, Gallagher says the agency is setting up a perverse system of incentives for those who ought to be its allies, the CCOs of IAs. Read More


Fractal Ambiguity in the AIFMD Passport Status of the U.S.

Aug 6th, 2015 | Filed under: Regulatory

What does the road to passport status look like for the US, regarding Europe's AIFMD? It looks rocky, and ESMA seems disinclined to draw a legible map. Instead it offers ambiguity and links to further ambiguity in the footnotes of its report.Read More


MMIF Reporting: An Ongoing Challenge for Fund Administrators

Aug 5th, 2015 | Filed under: Hedge Fund Industry Trends, Hedge Fund Regulation, Due Diligence Process, UCITs

Guest columnist Shane Brett discusses a new RR Donnelley survey on the MMIF challenges facing fund administrators.Read More


Enterprise Software Marketers Confirm: Seven is a Sacred Number

Jul 21st, 2015 | Filed under: Regulatory, Technology

God rested on the seventh day of the week of creation. Ever since, the number seven has stood for the completion of an epoch, or of a perfect set. Thus, a German enterprise concern has now listed the "seven pillars" for improved market surveillance through software.Read More


SEC: KKR Misallocated ‘Broken Deal’ Costs

Jul 14th, 2015 | Filed under: Private Equity, Risk management, Regulatory

A recent SEC finding at the expense of KKR illustrates the risk inherent in non-allocation, or careless allocation, of broken-deal expenses, and illustrates that lawyers don't necessarily use the word "deceit" to mean what one might think it means. Read More


Aleynikov Again: State Jury Conviction Set Aside

Jul 8th, 2015 | Filed under: Algorithmic and high-frequency trading, Technology, Legislation/Court rulings

The judge's ruling setting aside the jury's guilty verdict is, of course, grand news for Aleynikov. It is also the curtain on a sometimes farcical spectacle. But let us not forget that there are issues of principle involved. Read More


Usury Law: Not Too far From the Madden Crowd

Jul 7th, 2015 | Filed under: Derivatives, Regulatory, Legislation/Court rulings

National and international markets have long been accustomed to the fact that various states in the United States have their own usury laws. Still, litigation in the 2d Circuit, arising out of New York, may have a substantial impact on credit markets and their derivatives. Read More


Dead Hand Proxy Puts: A Case Study

Jun 29th, 2015 | Filed under: Insolvency, Legislation/Court rulings

The creation of a so-called Dead Hand Proxy Put in the Healthways matter was especially egregious because it took place immediately after the board had agreed, under considerable shareholder pressure, that it would de-stagger its elections. The appearance then was that after giving up one defensive moat, the incumbents with the help of lenders immediately created for themselves another.Read More


Fractional Reserve Banking: From First Premises

Jun 24th, 2015 | Filed under: Currencies, Regulatory

Banks are in the liquidity transformation business, and that is a critical role. But the ossification of the institutions that perform that role, by tradition, assumption, and concomitant regulation, is a threat to its success. Read More


Basel: What Does IRRBB Demand from Supervisors or Bank Boards?

Jun 18th, 2015 | Filed under: Regulatory

Central bankers now believe that they have to fix as supervisors what central bankers have wrought as money creators. The gnomes of Basel say that the interest rate risk management regime needs work because central bankers have given the world a prolonged period of exceptionally low interest rates, which has inevitably raised the stakes in this area. Read More


Spoofing: The ‘It’ Enforcement Action

Jun 17th, 2015 | Filed under: Algorithmic and high-frequency trading, Hedge Fund Strategies, Derivatives, Regulatory, Technology

Spoofing is probably about as ubiquitous as texting-while-driving. And it is possible to make an example of a spoofer caught red-handed. But it isn't clear what purpose that will serve. The real problem is that a broken market contains a broken set of incentives. Read More


Side Letters and the Caymans: The Latest

Jun 2nd, 2015 | Filed under: Hedge Fund Regulation, Alpha Strategies, Insolvency, Legislation/Court rulings

This Lancelot's adventures came to a bad end: defeated by the dragon of insolvency. But its official liquidator did win a victory over an investor seeking special treatment via a side letter.Read More


Corporate Governance: Sunday in the Park With George

May 19th, 2015 | Filed under: Regulatory, Emerging markets

The controversy over corporate governance, and whether the changes favored by reformers show up as superior corporate performance (as measured, for example, by Tobin's q) strikes Faille as dangerously abstract. The only way to get to the pointillist painting is by starting with particular data points. Read More


The STOCK Act Was Just For Show: Looking at the Inside of Insider Trading

May 17th, 2015 | Filed under: Hedge Fund Strategies, Legislation/Court rulings

What about the Congressionally employed leaker in a matter that looks like an insider tip to hedge fund traders? Is the SEC even allowed to ask? Shockingly, Congress wants special treatment for itself and its staff. Read More


The Forrest or the HFTrees? ‘Preferred Data Customers’

May 7th, 2015 | Filed under: Algorithmic and high-frequency trading, Hedge Fund Strategies, Legislation/Court rulings

It is of course possible to “question the wisdom of the SEC’s stance on this issue and its fairness to ordinary investors,” said the Judge in the Lanier/HFT decision. But the court isn’t in the business of second guessing the wisdom of regulation. Lanier's claims are dismissed. Read More


Bankruptcy Giant Harvey Miller: Rest in Peace

May 5th, 2015 | Filed under: Alpha Strategies, Insolvency, Legislation/Court rulings

One can argue with Harvey Miller, and with his old-school views about bankruptcy law, but now that he can no longer argue back one should show due deference. Read More


GOOG to Test Buy-on-Antitrust-Charge Theory

Apr 26th, 2015 | Filed under: Technology, Legislation/Court rulings, Alpha Seekers

Look for the EC sometime in the near future to bring a complaint about the contracts into which Google has entered with manufacturers that require them to construct the handsets in a way that favors Google’s famous search engine [over, for example, Microsoft’s Bing.] But consider that even this preliminary skirmish over comparison shopping might be a bullish sign for GOOG.Read More


Aleynikov’s Trial and My Cousin Vinnie

Apr 21st, 2015 | Filed under: Algorithmic and high-frequency trading, Intellectual Property, Legislation/Court rulings

A party seeking to employ an expert witness is supposed to let the other side know who the expert is in advance of trial. Fans of a classic Joe Pesci movie will remember that it isn't necessary to join the prosecutor in a hunting lodge. Read More


Tax & Election Seasons Create Alternative Altercations in the US

Apr 20th, 2015 | Filed under: Real Estate, Venture capital, Legislation/Court rulings, Partner accounting

As a general rule, politicians [mostly] on the Democratic side benefit by raising the issue of the taxation of carried interest during campaigns and then quietly letting it die, as their donors expect, when the legislature is actually working on tax bills. It's a way of signaling who is a "populist" and who isn't. Read More


Eurelectric Speaks Up For Grushenka

Apr 16th, 2015 | Filed under: Derivatives, Risk management, Regulatory

Is it possible or desirable to separate "speculation" from operational hedging, so as to clear the way for industries to do the latter without the regulatory burdens that planners want to impose upon the former? Once Europe has decided that speculation is a bad thing, won't it end up pursuing the demon ways that will collapse the proposed distinction? Read More


Liquidity, Leverage and Those Nimble Hedge Funds

Apr 9th, 2015 | Filed under: Hedge Fund Strategies, Derivatives, Risk management, Regulatory

Basel III has given us three different statistics with a common goal, to keep banks to a stable funding profile, neither too illiquid nor too highly leveraged. As these requirements come on-line, what will be the consequences for the relationship between prime brokers and hedge fund managers? Read More


Reflections on the MS Internet Explorer, R.I.P.

Apr 5th, 2015 | Filed under: Algorithmic and high-frequency trading, Technology, Legislation/Court rulings

The U.S. Department of Justice typically brings high-profile antitrust actions against 'monopolists' by piling its legal theories on top of dubious micro-economics. A recent announcement by Microsoft sends Faille down memory lane, to two 1990s era actions by the D of J against MS in the days when Bill Gates was still a great media ogre. Read More


The Supreme Court and Securities Fraud: No Barking Tuesday Night

Mar 31st, 2015 | Filed under: Legislation/Court rulings

The U.S. Supreme Court has just created a new, and confusing, standard for the trial of issuers who have made opinionated statements in offering documents. In certain contexts, to be determined ad hoc, the statement of an opinion, such as "we believe our practices are all lawful and value adding" can be a misleading omission of facts that might tend to the contrary conclusion. Read More


Most Investors Sanguine About Central Clearing Mandates

Mar 22nd, 2015 | Filed under: Hedge Fund Industry Trends, Derivatives, Regulatory

The international push to mandate central clearing has expanded the clearinghouses "well beyond levels the market has ever seen," Greenwich Associates reminds us in a new report. This is an experiment, and there remains some grounds for uncertainty about the outcome. Read More


KPMG, MFA & AIMA: Institutional Investors & Customization

Mar 19th, 2015 | Filed under: Hedge Fund Industry Trends, Liability Driven Investing, Hedge Fund Strategies, Institutional Investing, Alternative Mutual Funds, Regulatory, Asset allocation, Fees

Surveys suggest that certain conspicuous ongoing trends will continue. For example, the classic 20 + 2 fee structure will continue to crumble, replaced by "customized" structures. A full 91% of the small hedge fund managers who filled out a survey agreed with this. A mere 76% of large hedge fund managers did likewise. Read More


ESMA to Member States: You’re Not Doing Enough Re: MiFiD

Mar 18th, 2015 | Filed under: Retail Investing, Institutional Investing, Regulatory

A newly released report tells us that ESMA is unhappy with the national "competent authorities" as to how they've enforced MiFiD. the report implies that the adjective in the phrase "competent authorities" is to be understood as a courtesy rather than a description. Read More


A Defeat, but Not a Rout, for Appraisal Arb

Mar 17th, 2015 | Filed under: Hedge Fund Strategies, Alpha Strategies, Legislation/Court rulings

The Delaware Chancery Court would apparently have preferred to stay out of the issue of valuation as it played itself out in the 2012 acquisition of Ancestry.com by Permira. But it couldn't: the statute encouraging appraisal fights was too clearly worded for that. Read More


AIMA Reports: Activist Hedge Funds are the Good Guys

Mar 3rd, 2015 | Filed under: Private Equity, Hedge Fund Strategies, Regulatory

Activist investors usually aren't trying to take control of a company. And when they are, managers have strong existing tools to foil them. What activist investors can do is increase share value, over sustained periods.Read More


The Next Big Thing: A Robotic ‘Nexus’ of Contracts

Mar 2nd, 2015 | Filed under: Currencies, Regulatory, Technology, Digital currencies

In some fairly routine middle-critter corporate roles, there may no longer be much need for human managerial involvement. Enter the self-running business entity: another big step toward the obsolescence of human beings some of whom, nonetheless, will get wealthy in the process. Read More


On First Looking Into SEC’s Homer: A Final Rule on Swaps Reporting

Feb 23rd, 2015 | Filed under: Derivatives, Regulatory

Commenters successful pressed for certain changes in this massive new rule during its years of gestation. For example, the rule incorporates a T + 24 approach for the reporting of block trades. But warned, though, blizzards in NYC don't stop the ticking of that 24 hour clock. Read More


A Basis for Pursuing the Pursuers? Sonar-based Whale Hunts

Feb 17th, 2015 | Filed under: Algorithmic and high-frequency trading, Derivatives, Institutional Investing, Alpha Hunters, Regulatory

To the extent that high-frequency trading is analogized to 'insider trading,' it may be in trouble with securities regulators but still in the clear with commodities regulators. After all, the latter do allow hedgers to use non-public material information to protect themselves. But Gregory Scopino doesn't believe pinging and related HFT practices should be in the clear with the CFTC at all. Read More


Should Governments Slow Trading Down by Taxing It?

Feb 5th, 2015 | Filed under: Algorithmic and high-frequency trading, Hedge Fund Strategies, Regulatory, Technology

A physicist recently suggested that exchanges might do well to change the nature of the trading they host, holding batch auctions every one-hundredth of a second to better serve their real economic functions. Then a commenter proposed that taxation could achieve the same effect. Our physicist went back to the drawing board to consider this. Read More


Basel Committee’s Latest Progress Report: Buy IT

Feb 4th, 2015 | Filed under: Regulatory

Out of the 31 banks surveyed by the Basel Committee for its latest progress report on risk data aggregation, 45% reported that they will not be in compliance with the Basel demands by the deadline, a year from now. But surely there is a profit opportunity in here for someone. Read More


Crowdfunding: In the Gun Sights of Patent Plaintiffs

Feb 3rd, 2015 | Filed under: Regulatory, Crowdfunding, Intellectual Property, Legislation/Court rulings

The first of the three patents cited by the plaintiffs was filed at a time when the crowdfunding exemption movement was making a fair amount of noise on Capitol Hill, though it had not yet had tangible success. One might already entertain certain suspicions. Read More


Stifling Debate on Classified Boards: Je Suis Charlie!

Feb 2nd, 2015 | Filed under: Hedge Fund Strategies, Regulatory

Unfortunately, Gallagher and Grundfest aren't simply contributing to the on-going debate over shareholder activism, classified boards, etc. They're trying to stifle it by suggesting a litigation campaign against the side they oppose. Shame on them. Read More


Financing For Knights in Shining, or in Sooty, Armor

Jan 29th, 2015 | Filed under: Private Equity, Risk management, Regulatory

There are certain deals that banks don't want to touch with the longest lance in a joust. That doesn't mean the deals don't get done: it means they go by default to the non-bank financiers. We look at the divide. Read More


Competing Bankruptcy Filings for Caesar’s: Third-Party Releases

Jan 25th, 2015 | Filed under: Private Equity, Insolvency, Legislation/Court rulings

A legal donnybrook has begun for control of Caesar's assets. An important side issue involves bankruptcy court treatment of non-debtors seeking release from alleged liabilities of their own, and a split amongst the appeals court circuits over such treatment. Read More