Alert December 13, 2011

SEC Announces Charges Against Hedge Fund Managers Arising out of Aberrational Performance Inquiry

The SEC announced four additional enforcement actions stemming from its Aberrational Performance Inquiry, an initiative to combat hedge fund fraud by identifying and investigating abnormal investment performance.  The initiative uses proprietary risk analytics to evaluate hedge fund returns for performance that appears inconsistent with a fund’s investment strategy or other benchmarks and then subjects funds identified by this process to further scrutiny.  The initiative, which is being conducted by the Asset Management Unit of the Division of Enforcement, is ongoing.