Section 16(b) of the Securities Exchange Act of 1934 generally provides that, unless an exemption is available, any profit made on purchases and sales, or sales and purchases, of an issuer’s equity securities within a period of less than six months (short-swing profits) by a beneficial owner of more than 10 percent of any class of the issuer’s equity securities inures to the benefit of the issuer. The issuer, or any of its shareholders, may bring suit to recover short-swing profits on behalf of the issuer. In a recent decision by the U.S. District Court for the Eastern District of New York (Court), a hedge fund that beneficially owned more than 10 percent of the common stock of an issuer was held liable under Section 16(b), notwithstanding the fact that it had delegated its voting and investment authority to its investment adviser. This article examines the Court’s decision, which is relevant to advisers whose funds may take more than a 10‑percent stake in companies’ equity securities. For discussion of regulatory reporting of beneficial ownership, see “How Fund Managers Can Navigate Sections 13(d) and 16 of the Exchange Act” (Feb. 28, 2019); “Alleging Dozens of Violations, SEC Charges Leon Cooperman and Omega Advisors With Insider Trading and Failing to Make Regulatory Filings” (Sep. 29, 2016); and “Establishing, Maintaining and Exiting a Minority Equity Position: U.S. Securities Law Considerations for Hedge Funds” (Jan. 15, 2009).