New York partner Kay Gordon was quoted in a two-part article featured in the February 3 and February 9 issues of Hedge Fund LCD titled, “What Hedge Fund Managers Can Do to Prevent, Detect and Correct Trade Errors.” The first part provided guidelines for hedge fund managers to identify whether a trade error has occurred and the legal obligations related to handling, correcting, and disclosing trade errors in such an occurrence. The second part outlined the specific governance and compliance best practices hedge fund managers can adopt to prevent, detect and mitigate the risk of traditional and algorithmic trading errors.
Kay summarized, “There is some guidance on the subject of trade errors from regulators. Your first guiding principle in dealing with trade errors is a manager’s fiduciary duty under the Investment Advisers Act of 1940, whereby the manager has a duty to act in the best interest of his or her clients and the clients need to be treated fairly. The SEC has also said that a manager cannot use soft dollars to rectify a trade error. Additionally, the SEC said managers should have trade error policies. Managers have certain discretion to create a policy that is appropriate for their business and clients, but there should be trade error policies in place.”
Read “What Hedge Fund Managers Can Do to Prevent, Detect and Correct Trade Errors (Part one of two)” (Log-in Required.)
Read “What Hedge Fund Managers Can Do to Prevent, Detect and Correct Trade Errors (Part two of two)” (Log-in Required.)