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Harry S. Davis

A Look Across The Pond: Uncle Sam’s Recent Enforcement Actions And Civil Litigation Update Concerning Hedge Funds . Harry S. Davis. Statistics: Incidents of Misconduct. Number of Cases. 34. 12. 12. 9. 8. 7. 6. 6. Year. Current Enforcement Landscape.

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Harry S. Davis

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  1. A Look Across The Pond: Uncle Sam’s Recent Enforcement Actions And Civil Litigation Update Concerning Hedge Funds Harry S. Davis

  2. Statistics: Incidents of Misconduct Number of Cases 34 12 12 9 8 7 6 6 Year

  3. Current Enforcement Landscape Types of Enforcement Actions Against Hedge Funds • Valuation Fraud • Misappropriation of Assets • Insider Trading • Market Manipulation • Violations in Connection with Securities Offerings • Naked Shorting • Market Timing/Late Trading • Hedge Fund Marketing • Antitrust Issues

  4. The SEC’s PIPEs Investigation • Broad Ranging, Industry-Wide Investigation • Civil and Criminal • Hedge Funds, Placement Agents and Individuals

  5. The SEC’s PIPEs Investigation • Genesis • Complaint By Mutual Fund To SEC • Noticed Significant Price Erosion Prior To Announcement Of PIPE • The Investigation Begins • OCIE: 22 Placement Agents/Brokers/Bankers Get Requests For Information • Identify Deals • Who Knew About Them, What Did They Know, And When? • Investigation Heats Up: Enforcement Involved • Focus Turns To Hedge Funds

  6. The SEC’s PIPEs Investigation • Insider Trading Claims • Shorting After Knowledge of PIPE • Claim Based, At Least In Part, Upon Promise Not To Engage In Shorting Activities • Market Manipulation • The “Death Spiral”: Shorting For The Purpose Of Driving Price Down Prior To Conversion • Hiding Trades From Market • Failure To Deliver • Matched Orders and Wash Sales

  7. The SEC’s PIPEs Investigation • Other Issues • Public Disclosure: How Long Do You Have To Wait Before Shorting? • Not Covering Short Position With Newly Registered Shares • Properly Unwinding Positions • Pre-Arranging Borrow • Investment Intent

  8. The Civil Litigation Landscape • Claims Against Redeeming Investors • Manhattan Investment Fund • Lancer • Bayou • Theories of Liability • Fraudulent Transfer • Preference • Unjust Enrichment

  9. The Civil Litigation Landscape • Purportedly False Research Reports Procured By Hedge Funds: Issuers v. The Shorts • Overstock.com • Biovail • Fairfax • Theories of Liability • RICO • Disparagement • Tortious Interference

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