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Harry S. Davis A Look Across The Pond: Uncle Sam’s Recent Enforcement Actions And Civil Litigation Update Concerning Hedge Funds.

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Presentation on theme: "Harry S. Davis A Look Across The Pond: Uncle Sam’s Recent Enforcement Actions And Civil Litigation Update Concerning Hedge Funds."— Presentation transcript:

1 Harry S. Davis A Look Across The Pond: Uncle Sam’s Recent Enforcement Actions And Civil Litigation Update Concerning Hedge Funds

2 Statistics: Incidents of Misconduct 6 Year Number of Cases

3 Current Enforcement Landscape Valuation Fraud Misappropriation of Assets Insider Trading Market Manipulation Violations in Connection with Securities Offerings Naked Shorting Market Timing/Late Trading Hedge Fund Marketing Antitrust Issues Types of Enforcement Actions Against Hedge Funds

4 The SEC’s PIPEs Investigation Broad Ranging, Industry-Wide Investigation Civil and Criminal Hedge Funds, Placement Agents and Individuals

5 The SEC’s PIPEs Investigation Genesis –Complaint By Mutual Fund To SEC –Noticed Significant Price Erosion Prior To Announcement Of PIPE The Investigation Begins –OCIE: 22 Placement Agents/Brokers/Bankers Get Requests For Information Identify Deals Who Knew About Them, What Did They Know, And When? Investigation Heats Up: Enforcement Involved –Focus Turns To Hedge Funds

6 The SEC’s PIPEs Investigation Insider Trading Claims –Shorting After Knowledge of PIPE –Claim Based, At Least In Part, Upon Promise Not To Engage In Shorting Activities Market Manipulation –The “Death Spiral”: Shorting For The Purpose Of Driving Price Down Prior To Conversion –Hiding Trades From Market –Failure To Deliver –Matched Orders and Wash Sales

7 The SEC’s PIPEs Investigation Other Issues –Public Disclosure: How Long Do You Have To Wait Before Shorting? –Not Covering Short Position With Newly Registered Shares –Properly Unwinding Positions –Pre-Arranging Borrow –Investment Intent

8 The Civil Litigation Landscape Claims Against Redeeming Investors –Manhattan Investment Fund –Lancer –Bayou Theories of Liability –Fraudulent Transfer –Preference –Unjust Enrichment

9 The Civil Litigation Landscape Purportedly False Research Reports Procured By Hedge Funds: Issuers v. The Shorts –Overstock.com –Biovail –Fairfax Theories of Liability –RICO –Disparagement –Tortious Interference


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