New rules could see hedge funds sued for ‘doing a good job’

SEC proposal would make it easier for investors to sue hedge funds than mutual funds for negligence

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New rules proposed by US regulators would remove hedge funds’ ability to protect themselves against negligence lawsuits, leaving them liable for mistakes as simple as fat-finger trades or losing money in a falling market.

The Securities and Exchange Commission wants to strip hedge fund contracts of a routine clause that shields fund managers from claims that they behaved carelessly. If the SEC introduces the rule as it stands, hedge funds – the biggest risk-takers in financial markets – would

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