SEC TO HEDGE FUNDS:

FAILURE TO ADOPT COMPLIANCE PLAN
MAY RESULT IN INSIDER TRADING PROSECUTION

In an unusual move, the Securities and Exchange Commission (SEC) recently issued a Report of Investigation concerning purported insider trading by The Retirement Systems of Alabama (RSA), a state
pension fund.

While the SEC did not bring an enforcement action against RSA, it issued the report, on March 6, 2008, to remind “investment managers, public and private” of their obligation to comply with insider trading laws and to reiterate “the risks they undertake by operating without an adequate compliance program.”

The SEC’s interest in prosecuting insider trading claims against hedge fund advisers has been evident for several years. But this was the SEC’s most explicit statement to date that it is important for investment managers, whether or not they are registered with the SEC, to implement and enforce internal compliance policies that aim to deter insider trading.

For our readers, we have prepared a short summary of the facts and issues leading up to the Report of Investigation and their implications for investment managers.

Please read it here.

DLA Piper’s Securities Litigation lawyers provide experienced legal counsel for individuals and entities in all areas of securities law, participating in landmark cases that have helped shape securities laws and successfully representing clients before the SEC and United States Attorneys.

For more information, please contact:

Perrie Weiner, International Co-Chair, Securities Litigation

Robert Brownlie,
Co-Chair, Securities Litigation

Nicolas Morgan

Jeffrey B. Coopersmith

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