The Securities and Exchange Commission (SEC) has attempted to stop insider trading since its creation.  Eliminating this misconduct has proven to be an elusive goal, as the Boesky scandal of the 1980s demonstrated.  The growth of the hedge fund industry has heightened the SEC’s challenge.  There is a longstanding and widespread belief among law enforcement personnel that insider trading involving hedge funds is a systemic problem.  Until recently, however, very few of the SEC’s insider trading cases involved hedge funds.  Today, the SEC is committed “to root[ing] out insider trading on Wall Street and in the hedge fund industry.”  It is bringing to bear more resources and new investigative tools to do the job.  A restructured Enforcement Division has new units ramping up that will concentrate on, among other things, insider trading by market professionals, including hedge funds.  In addition, joint investigations with the Department of Justice (DOJ) are now more common, allowing the SEC to take advantage of investigative strategies and tools long used in criminal cases.  Several insider trading cases involving hedge funds were brought in the past year, and more can be expected.  It has been reported that the SEC sent “at least” three dozen subpoenas to hedge funds and brokerages in “an expanding sweep of potential insider trading violations” relating to health care mergers in the past three years.  Also, the SEC filed charges in May 2010 against a Walt Disney Company executive and her companion, who allegedly shopped confidential earnings information about the company to over 30 hedge funds (some – but not all – of which reported the overture to the government).  Given this unprecedented level of enforcement attention, hedge funds and their investment advisers need to make sure that adequate procedures, customized for their particular business models and strictly enforced, are in place to minimize the risk of insider trading violations.  Fund managers that fail to consult counsel now may discover, only when it is too late, that they are the target of an extensive undercover government investigation.  In a guest article, Michael D. Trager, Richard L. Jacobson and Christopher Rhee, respectively, Senior Partner, Counsel and Partner at Arnold & Porter LLP, offer a comprehensive analysis of the current developments in insider trading law most relevant to hedge funds and hedge fund managers.