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    Jul. 30, 2026

New U.K. Short Selling Regime: Key Takeaways for Hedge Fund Managers

On July 13, 2026, a new U.K. short selling regime entered into force, replacing the U.K. version of Regulation (EU) No. 236/2012 on short selling and certain aspects of credit default swaps, which had been assimilated into U.K. law following the U.K.’s withdrawal from the E.U. (UK SSR 2012). The new regime is composed of the Short Selling Regulations 2025 (SI 2025/29), issued by HM Treasury on January 13, 2025, and a new Short Selling Rules sourcebook within the Financial Conduct Authority (FCA) Handbook (FCA SSR). The SSR 2025 establishes the legislative framework for the regulation of short selling and confers rulemaking, supervisory and enforcement powers on the FCA. The FCA SSR sets out the firm-facing requirements, consolidating provisions previously contained in the U.K. SSR 2012, related delegated regulations, associated technical standards and relevant European Securities and Markets Authority guidance, including its Q&A. This guest article by Sidley Austin attorneys Leonard Ng and Qalid Mohamed addresses the scope and principal requirements of the new regime; compares the U.K. and E.U. short selling regimes; and considers its implications for hedge fund managers. For additional insights from Ng, see “A U.S. Fund Manager’s Perspective on AIFMD 2.0” (Mar. 26, 2026); and “FCA ‘Dear CEO’ Letter Highlights Focus on Private Markets and Resilience” (Apr. 10, 2025).

SEC and NFA Enter Into First-Ever Memorandum of Understanding

On May 21, 2026, the SEC and the NFA entered into a Memorandum of Understanding (MOU) aimed at enhancing information sharing and minimizing duplicative regulatory efforts. It reflects their intent to “collaborate, cooperate, and share information in areas of common regulatory interest to facilitate their oversight of financial services firms and markets.” The MOU “establishes three key coordination mechanisms: (1) formalized information sharing on examinations, market conditions and regulatory issues; (2) periodic staff meetings to coordinate exam planning, risk assessment and supervisory priorities; and (3) robust confidentiality protections for shared nonpublic information,” Katten partner Carl Kennedy told the Hedge Fund Law Report. This article parses the MOU, with additional commentary on the implications of the MOU from Kennedy and Katten partner Michael Didiuk. See “NFA Issues New Rules on Use of Third Parties to Perform Members’ Regulatory Functions” (May 27, 2021).

Implications of the COINS Act and Evolving Token Regulations for Fund Managers

As broad regulatory changes under the current U.S. administration continue to drive hope for a more laissez-faire environment in which private funds can make ever freer use of technological innovations and bespoke cross-border strategies, the importance of conducting proper diligence is hard to overstate. Although the growing use of blockchain and tokenization has provided operational freedoms to private funds scarcely imaginable in the past, the proliferation of complex and disparate regulatory regimes in foreign jurisdictions poses pitfalls for fund managers that do not properly tailor their compliance programs and outbound investment protocols. Those points were covered in two panels at Morgan Lewis’ 19th Annual Advanced Topics in Hedge Fund Practices Conference held June 9, 2026, entitled “International Trade and National Security Regulations” and “Cryptocurrencies, Digital Assets and the Tokenization of Funds.” The speakers on the first panel were Morgan Lewis partners David Plotinsky and Casey Weaver, and those on the second panel were partners Arnaud Grünthaler, Robert A. Schwartz and Todd P. Zerega. This article presents key takeaways from the two panels. For coverage of Morgan Lewis’ 2025 Hedge Fund Conference, see “SEC Regulatory and Examination Priorities in 2025” (Aug. 14, 2025).

SEC Fines Adviser $100 Million for Failing to Detect Alleged Cherry Picking Scheme

The allocation of profitable trades to favored accounts at the expense of others is a perennial subject of SEC enforcement activity. In its latest action on the issue, the SEC announced settled charges against a registered investment adviser for failing to detect and prevent an alleged cherry picking scheme by its former co‑chief investment officer. The adviser agreed to pay a $100‑million civil penalty, according to the order (Order) issued on June 5, 2026. The SEC faulted the firm less for the trading itself – which remains the subject of separate, contested proceedings against the former executive – than for its failure to police such trading and enforce its own written policies. This article analyzes the conduct at issue; the alleged compliance and supervisory failures; and the terms of the Order. See “CFTC Goes After CPO/CTA and Principal in Alleged Cherry Picking Scheme” (Mar. 28, 2024); “Adviser and Principal Sanctioned for Violations Associated With Representative’s Cherry Picking Scheme” (Oct. 27, 2022); and “SEC Charges Private Fund CCO in Cherry Picking Scheme” (Jul. 29, 2021).

In‑House Insights on Optimizing Compliance Culture

A strong culture of compliance can be labor intensive to build but a lifesaver when the outside regulatory environment becomes precarious and unpredictable. In a panel discussion at the New York City Bar’s Compliance Conference, in-house experts offered insights on the elements of a strong compliance culture, how firms can work to optimize their culture and methods for measuring the strength of that culture through turbulent times. This article synthesizes the discussion with Patricia Cooper, CCO of Stony Brook Medicine; Carmine Guiga, vice president and compliance counsel at NBCUniversal; Jonny Frank, partner at StoneTurn; and Jonathan New, partner at BakerHostetler. See “Compliance 5.0: A Culture-Centered Approach” (Aug. 15, 2024).

Jason Karlinsky Joins Choate in New York

Choate welcomed Jason S. Karlinsky as a partner in the firm’s fund formation and investment management practice in New York. He pairs deep fund formation experience across asset classes with more than a decade of commercial and in-house legal leadership at a global asset manager. For another recent addition to Choate, see “Choate Adds Former Hedge Fund GC/CCO Jonathan Danziger” (May 7, 2026).

A New Look – the Same Trusted Resource

You may notice a new look in this issue of the Hedge Fund Law Report, which offers a glimpse of the publication’s refreshed visual identity and logo. As the first phase of a broader rollout, the updated branding will eventually extend to www.hflawreport.com and other product touchpoints. The new design’s more modern aesthetic reflects our long-term vision for the publication, while more clearly highlighting our place within the distinguished ION Analytics family of products that deliver business intelligence, market data, news and analysis. Although our brand has evolved, subscribers can expect continuity in everything that matters most: the same authoritative analysis, practical guidance, editorial standards, subject matter coverage and frequency of publication. We look forward to continuing to support subscribers as they navigate the evolving hedge and private funds landscape.

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