Hedge Funds SEC Enforcement Division

SEC Enforcement Division Targets High Performing Funds

The Security and Exchange Commission Enforcement Division will target hedge funds that beat the market. Hedge funds that regularly outperform the market by 3% or more can expect extra scrutiny from the SEC's Division of Enforcement.

n response to the Madoff scandal, the Division of Enforcement for the U.S. Securities and Exchange Commission is focusing on hedge funds that outperform market indexes by 3% on a steady basis. This initiative has raised a number of questions.

Recently, during congressional testimony, Robert Khuzami, the Director of the Division of Enforcement for the U.S. Securities and Exchange Commission (SEC), faced tough questions regarding the SEC's response to the Madoff scandal. In response, Khuzami revealed an investigative initiative concerning hedge funds. Enforcement is now focusing on hedge funds that outperform "market indexes by 3% and [are] doing it on a steady basis." Khuzami referred to such performance as "aberrational," and stated that Enforcement is "canvassing all hedge funds" for such "aberrational performance."

This initiative raises a number of questions. For example, should skilled portfolio managers (and their investors) bear the burden and costs of an SEC investigation just because they have returned more than the market? Moreover, how and why did the Enforcement Division determine to set the threshold at three percent? Is this threshold appropriate and does it reflect "aberrational" performance, like Khuzami suggests? Source

Related to: Hedge Funds SEC Enforcement Division

Tags: Hedge Funds SEC Enforcement Division, Hedge Funds, SEC Enforcement Division, Hedge Funds SEC, Enforcement Division, Division of Enforcement

Disclaimer

The content of this blog is in no way a means of financial advice or a solicitation to sell any investment or product. This website is for informational purposes only and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments nor an endorsement of any particular investment advisor firm or individual.

No warranty or guarantee of any kind, expressed or implied, is given regarding the accuracy, reliability, veracity, or completeness of the information provided here or by following links from this or any other page within this site, and under no circumstances will the author or service provider be held responsible, or liable for errors, or omissions resulting in any loss or damage caused or alleged to be caused by information contained in the material presented on the site, including but not limited to direct, indirect, incidental, special or consequential damages caused by using the information.