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ARTICLE · 16 AUGUST 2007

SEC Turns Up Heat On Hedge Funds

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On July 31, 2007, SEC Chairman Christopher Cox announced the creation of a new hedge fund task force within the Enforcement Division as the Commission's latest effort to "enhance its efforts to combat hedge fund insider trading."

United StatesFinance and Banking

On July 31, 2007, SEC Chairman Christopher Cox announced the creation of a new hedge fund task force within the Enforcement Division as the Commission's latest effort to "enhance its efforts to combat hedge fund insider trading." Although no other details were disclosed with respect to the new unit's formation, the creation of a task force dedicated to scrutinizing hedge funds suggests a greater need for fund managers to stay abreast of the latest SEC staff interpretations that may affect business practices.

Rule 10b-5

Hedge funds should consider the potential application of Rule 10b-5, one of the cornerstones of the SEC's enforcement program, to certain hedge fund business practices. Rule 10b-5 makes it unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility or any national securities exchange: (1) to employ any device, scheme, or artifice to defraud, (2) to make any untrue statement of

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