New York (HedgeCo.net) – Lawmakers are finalizing an extensive overhaul of financial mandates that are sure to alter the regulatory landscape for hedge funds. One likely change will be registration with the SEC, which brings a variety of new rules and regulations.

Advisors say that hedge fund managers need to be prepared to proactively address the changes that are about to shake up the industry. Investment advisors and broker dealers have been subject to similar regulations for some time now, and hedge fund managers can learn from their compliance best practices.

“One expected requirement is related to the preservation and monitoring of all electronic business communications, including email, IM and social media platforms.” Stephen Marsh, CEO and  founder of Smarsh, said. “By implementing a message archiving program, hedge fund advisors can maintain ease of mind that they are maintaining legal compliance.”

High-profile enforcement cases, like Piper Jaffray, in which the company was fined $700,000 for failing to retain nearly 4.3 million emails over a six-year period, will continue to surface as regulatory organizations step up enforcement. Hedge funds that do not proactively address new compliance demands are putting themselves at an unnecessary risk, which could end up being extremely costly.

• Regulatory actions against financial services companies rose from 18% in 2008 to 31% in 2009. [Fulbright & Jaworski’s 6^th Annual Litigation Trends Survey Report, 2009]
• 78% of U.S. companies said that the number of lawsuits and regulatory inquiries they experienced increased in 2009 compared to 2008. 53% of respondents expect the number of lawsuits and regulatory inquiries to increase by at least 20% in 2010 [Trends in E-Discovery: A Market Perspective, Enterprise Strategy Group, November 2009]
• To get a sense of their outlook for 2010, an InvestmentNews survey asked advisers whether they plan to spend more on technology this year than they did in 2009. Advisers overwhelmingly responded in the affirmative — 63% indicated that they will be spending more [Investment News]
• 71% of financial advisors, brokers or registered financial advisors surveyed recently by American Century Investments said they have one or more future business uses planned with social media. Almost half (47%) of the 303 respondents said regulatory compliance was their biggest concern when using social networking sites for business.

Editing by Alex Akesson
For HedgeCo.net
alex@hedgeco.net
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