1.  A Hedge Fund manager should ensure it takes reasonable steps to understand the regulatory environment within which it operates and the specific rules applicable to its business. The Hedge Fund manager should develop procedures to comply with these rules. The manager should additionally ensure that all staff are fully aware of the procedures and rules applicable to their particular area of work.

1.  This can be achieved by adopting a written Compliance Manual setting out policies on key areas such as investment and trading policies, code of ethics on personal dealing, market abuse (including insider dealing), conflicts of interest and the use of dealing commission in the UK to pay for research services. When new policies are implemented, the Manual should be updated accordingly.

A copy of the Manual should be given to every member of staff. Some firms may decide to supplement the Compliance Manual with written procedures for specified processes.

The Compliance Manual should be reviewed and maintained as a ‘living’ document and updated to reflect both changes that occur at the firm and any changes to applicable laws or regulations.

2.  Hedge Fund managers must be conscious of the regulatory restrictions that apply to promoting their services and marketing the Hedge Funds whose investments they manage.
[See also Section D1 (1)]
 

2.  Hedge Fund managers will need to have regard to the regulations of the jurisdictions in which they operate as well as those in which target investors are located and possibly other jurisdictions as well, including the jurisdiction in which the Hedge Fund is established and/or any stock exchanges on which its shares are listed. Breach of these regulations can lead to severe consequences, including investor suits, fines, rescission rights and criminal sanctions, as well as reputational damage.