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Recent developments in hedge fund enforcement and regulation by the SEC under the leadership of Chairman Cox suggest that he may not be the free market advocate everyone once thought he was

Nicolas Morgan (Of Counsel, at Securities Litigation Group, DLA Piper US LLP, Los Angeles, California, USA)
Edward Totino (Partner at Securities Litigation Group, DLA Piper US LLP, Los Angeles, California, USA)
Perrie Weiner (Partner and International Co‐Chair, at Securities Litigation Group, DLA Piper US LLP, Los Angeles, California, USA)

Journal of Investment Compliance

ISSN: 1528-5812

Article publication date: 1 October 2006

187

Abstract

Purpose

This paper aims to draw conclusions about the likelihood that Securities and Exchange Commission (“SEC”) Chairman Christopher Cox will take significant action to reduce regulation affecting hedge funds based on how the SEC has dealt with hedge fund regulation in both the rule making and enforcement arenas since Mr. Cox became Chairman.

Design/methodology/approach

Assesses actions taken by the SEC under Mr Cox's leadership with regard to PIPE (private investment in public equity) transactions by hedge funds, hedge fund registration rules, portfolio disclosure requirements, and alleged collusion among short‐selling hedge funds, research firms, and journalists.

Findings

The SEC's enforcement activities with respect to hedge funds that make short sales before the announcement of a PIPE transaction indicate that the SEC has no plans to lighten the regulatory or enforcement burden on hedge funds. The SEC's response to the DC Circuit Court's decision striking down the hedge fund registration rule likewise indicates that additional hedge fund regulation remains an SEC priority. While it remains to be seen how the SEC investigations and civil actions regarding the alleged collusion between short‐selling hedge funds, research firms and journalists will turn out, it appears unlikely that Chairman Cox will take any bold action to protect freedom of expression and the marketplace of ideas from attacks by disgruntled companies.

Originality/value

Provides a timely and insightful view of the near‐term outlook for SEC regulatory and enforcement policy toward hedge funds.

Keywords

Citation

Morgan, N., Totino, E. and Weiner, P. (2006), "Recent developments in hedge fund enforcement and regulation by the SEC under the leadership of Chairman Cox suggest that he may not be the free market advocate everyone once thought he was", Journal of Investment Compliance, Vol. 7 No. 4, pp. 4-11. https://doi.org/10.1108/15285810610719899

Publisher

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Emerald Group Publishing Limited

Copyright © 2006, Emerald Group Publishing Limited

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