Hedge fund managers may seek to recoup regulatory fines by imposing penalties on employees responsible for violations. However, when imposing such punishments on their employees, managers must take care to ensure they remain in compliance with labor law, while still incentivizing personnel to avoid violations of law, regulation or firm policies and procedures. In an effort to determine industry best practice with respect to imposing fines on employees, the Hedge Fund Law Report spoke with employment counsel and also surveyed 15 general counsels and other “C-level” decision-makers at leading hedge fund managers. We are presenting our findings in a two-part article series. The first part explored the options available to hedge fund managers for imposing penalties on their employees for regulatory violations and examined the limits of those options under employment law. This second part examines how hedge fund managers actually put these options into practice, addressing the prevalence of these remedies in the industry and best practices for hedge fund managers to deploy them. For more on hedge fund manager employment issues, see “Employees of Hedge Fund Managers May Be Liable for Failing to Prevent Fraud” (Jul. 30, 2015); and “Recent Decision Holds That Hedge Fund Managers Have Some Recourse Against Firm Employees That Engage in Insider Trading and Deceive Their Employers Pursuant to the Mandatory Victims Restitution Act” (Apr. 5, 2012).