The Hedge Fund Law Report

The definitive source of actionable intelligence on hedge fund law and regulation

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By Topic: Press Policies

  • From Vol. 5 No.46 (Dec. 6, 2012)

    Benefits and Burdens to Hedge Fund Managers of Speaking to the Media (Part Two of Two)

    After decades of reluctance, hedge fund managers are starting to talk to the media – a trend fueled by legal and business changes.  On the legal side, final rules under the Jumpstart Our Business Startups (JOBS) Act will implement the repeal of the ban on general solicitation and advertising for hedge funds that rely on Regulation D.  On the business side, the enhanced negotiating clout of investors has required managers to distinguish their product and service offerings.  There are at least six distinct benefits to hedge fund managers of talking to the media, as catalogued in the first article in this series.  See “Benefits and Burdens to Hedge Fund Managers of Speaking to the Media (Part One of Two),” The Hedge Fund Law Report, Vol. 5, No. 45 (Nov. 29, 2012).  However, talking to the media can also involve a range of regulatory, business, reputational and other risks.  This is the second article in our two-part series designed to help hedge fund managers decide whether to talk to the media and, if they do, how to identify and manage the attendant risks.  In particular, this article discusses the various downsides of speaking with the media; situations in which fund managers should avoid speaking to the media; and six best practices for minimizing the range of risks posed by communications between hedge fund manager principals and employees and the media.

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  • From Vol. 5 No.45 (Nov. 29, 2012)

    Benefits and Burdens to Hedge Fund Managers of Speaking to the Media (Part One of Two)

    The historical reticence of hedge fund managers was, in large part, a function of the very statutes and regulations that made the precipitous growth of the hedge fund industry possible.  The safe harbor that allowed hedge funds to avoid the public offering rules also prohibited managers from generally soliciting or advertising.  The rule that exempted hedge fund managers from investment adviser registration also prohibited managers from holding themselves out to the public as advisers.  And the laws that permitted hedge funds to avoid registering as investment companies prohibited the same hedge funds from engaging in a public offering.  But law and regulation were not the only factors that historically kept managers quiet.  In addition, in many periods before the credit crisis, the capital raising advantage was generally on the side of managers, at least the decent performing ones.  Hedge funds retained an air of exclusivity and manager reticence enhanced that aura.  Much has changed since the crisis, of course.  On the regulatory side, most hedge fund managers now have to register, and doing so allows – in effect, requires – a manager to hold itself out to the public as such.  And the Jumpstart Our Business Startups (JOBS) Act has effectively eliminated the ban on general solicitation.  For a deeper discussion of the contours and consequences of the proposed JOBS Act rules, see “JOBS Act: Proposed SEC Rules Would Dramatically Change Marketing Landscape for Hedge Funds,” The Hedge Fund Law Report, Vol. 5, No. 34 (Sep. 6, 2012).  On the business side, the post-crisis capital raising advantage has generally tipped towards institutional (and, increasingly, retail) investors.  As a result, managers have been able, as a legal matter, and have been required, as a business matter, to make their cases and pitch their products.  Most such efforts at persuasion have been undertaken in one-on-one meetings or at small events.  But to an increasing degree, hedge fund managers are talking to the financial and general press, appearing on television and otherwise interacting with mass media.  Doing so in a structured, thoughtful and well-advised way offers numerous benefits to managers.  But various legal and business risks continue to loom large.  This article is the first in a two-part series weighing the benefits and burdens to hedge fund managers of speaking to the press, and outlining best practices and compliance recommendations for interactions between managers and the media.  In particular, this article discusses the historical reluctance on the part of managers to speak to the press; how the JOBS Act and other legal and regulatory changes have relaxed that reluctance; and six discrete benefits to hedge fund managers of speaking with the press.  The second installment in the series will discuss the risks to managers of speaking with the press; situations where managers should avoid speaking to the press; and best practices and compliance recommendations for communications between principals and employees of hedge fund managers and the media.

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