Paul Hastings Hosts Program on Securities Litigation and Enforcement in Light of New SEC Initiatives to Enhance Enforcement Efforts and Encourage Witness Cooperation

On February 2, 2010, law firm Paul, Hastings, Janofsky & Walker LLP hosted a Securities Litigation & Enforcement Roundtable focusing on key current enforcement and witness cooperation initiatives at the Securities and Exchange Commission (SEC).  The SEC Enforcement Division, led by Director Robert Khuzami, recently introduced new investigative units designed to enhance and revamp its investigation efforts, as well as to encourage witness cooperation in investigations.  See “SEC Names New Co-Chiefs of Enforcement Division Asset Management Unit and Other Specialized Unit Chiefs,” Hedge Fund Law Report, Vol. 3, No. 3 (Jan. 20, 2010).  The speakers also discussed the implications of these initiatives and current enforcement trends for financial institutions and alternative investment vehicles, such as hedge funds.  One of the key points of the discussion was the SEC’s increased emphasis on insider trading enforcement, in particular in the hedge fund context.  The SEC has increased the number of insider trading enforcement actions recently initiated, and the techniques used by the regulator to investigate suspected insider trading have become increasingly aggressive and sophisticated.  For a comprehensive discussion of practice points that can help hedge fund managers avoid insider trading allegations, including links to relevant articles from the Hedge Fund Law Report, see “Regulatory Compliance Association Hosts Program on Increased Risk for Hedge Fund Directors and Officers in the New Era of Heightened Regulation and Enforcement,” Hedge Fund Law Report, Vol. 2, No. 50 (Dec. 17, 2009).  This article summarizes the most relevant topics discussed at the Paul Hastings Roundtable, focusing on the SEC’s new enforcement initiatives and cooperation measures (including cooperation agreements, deferred prosecution agreements and non-prosecution agreements), and emphasizing the potential impact of those measures on hedge funds and their managers.

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