The purpose of this paper is to illustrate through a recent Order Dismissing Proceedings against a San Francisco hedge fund manager the interplay between the SEC's regulation and…
Abstract
Purpose
The purpose of this paper is to illustrate through a recent Order Dismissing Proceedings against a San Francisco hedge fund manager the interplay between the SEC's regulation and enforcement programs and the way that a patient response to SEC enforcement allegations can sometimes be rewarded.
Design/methodology/approach
The paper explains the background to the Order Instituting Proceedings in the Global Crown case, how the Goldstein decision led to the Order Dismissing Proceedings, and the implications of that ODP.
Findings
The paper finds that in the future, as a result of the Goldstein decision, there will be fewer instances in which fraudulent statements by hedge fund managers to investors will be discovered, because the managers will not be registered and the SEC will therefore not have access to their records through the examination process; and, until a recently approved rule becomes effective, the SEC's remedies will be limited.
Practical implications
The result in the Global Crown case shows how respondents can sometimes benefit from a patient approach in responding to SEC enforcement allegations. If the respondents had settled the case when it was filed, the matter would have been closed before the Goldstein decision ripped out the legal premise of the SEC's enforcement action.
Originality/value
The paper presents a practical, interpretive guide to a recent SEC decision by an experienced lawyer who represents and advises broker‐dealers and other financial institutions on securities litigation, compliance and regulatory enforcement matters.