Particularly during the past 2 years of market turmoil, hedge fund managers in the US have encountered a step change in the intensity of regulatory investigation and litigation pressure. The SEC Enforcement Division has a dedicated Hedge Fund Working Group, which is investigating fraud and market manipulation by hedge fund investment advisers/managers. More than 100 cases involving hedge funds have been brought by the SEC in the past five years, with more than 20 so far this year. The SEC already has brought more enforcement actions involving hedge funds in the first four months of this year than all of last year. A significant proportion of the transatlantic information flow from the FSA to the SEC under cooperation arrangements has related to SEC activity in this area. Litigation in the US courts by aggrieved investors has been numerous and various, with fraud-based claims still in the majority. Though there has been egregious behaviour related to funds managed and advised from the US, this bias in the nature of claims filed is in part because of the legislative background and lower evidential hurdles in the US to filing claims based on fraud. Many matters framed as “fraud” in US proceedings would not be characterised in that way in UK litigation.

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