Regulation of Hedge Funds and Their Trading Activities

Summary

This practice note provides a brief overview of some of the most important regulations affecting the trading activities of hedge funds (HFs) under federal securities laws. HFs are private investment vehicles that use leverage, short selling, and other alternative approaches to enhance their risk/return profile, and that impose a performance fee or incentive allocation on their investors. Given their structure and the nature of their activities, HFs are subject to a myriad of regulations under federal securities laws of which counsel advising a HF should have a firm grasp. This practice note does not purport to cover all of the regulations with which a HF or its manager must comply and should not be viewed as a substitute for reading the actual language contained in the applicable rules and regulations discussed herein.