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
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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