Rule 206 (4)-8: New Anti-Fraud Rule
   LIVE Teleconference   

SEGMENT 1 :

Sarah Bessin, Assistant Chief Counsel, Division of Enforcement, U.S. Securities and Exchange Commission

- Background on Rule 206(4)-8
     a. The Goldstein decision
     b. Purpose of the rule
- Scope of the rule
     a. Who is covered
     b. What kind of conduct
- The scienter issue
- Cases brought under the rule

SEGMENT 2:

Bibb L. Strench, Partner, Sutherland Asbill & Brennan LLP

- What is it?
     • definition
     • important points
          a. false or misleading statements
          b. no scienter

SEGMENT 3:

Perrie Weiner, Partner and Co-Chairman of the Securities Litigation Practice & Head of Hedge Fund Practice, DLA Piper US LLP

- Background of Rule Adoption
- Criticisms of the Rule
- Enforcement Activity


SEGMENT 4:

Terry Davis, Senior Associate - Business Law Department, Investment Management and Funds Practice, Pillsbury Winthrop Shaw Pittman LLP

- Impact of new rule on Chief Compliance Officer and existing compliance structure of the adviser.
- Ongoing diligence by CCO – need to more closely supervise service providers?
- Does the new rule change the focus of the annual assessment?
- Examples and case studies.

SEGMENT 5:

Guido N. Van Drunen, Director of Advisory Services, KPMG

- What constitutes fraud? Examples
     a. Conference call statements
     b. Performance numbers
     c. Strategy drift

- Inadvertent slips, rule breaking and SEC enforcement
     a. What can you say? What can’t you say?

- Investment environment, legal caveats and susceptibility
     a. Subprime crisis
     b. Valuations difficulties and mark to model issues w/ relation to investor expectations

- What’s changed? Why should investors care?
     a. Current fraud rules in place
     b. Past punitive measures
     c. Intent of regulators to focus on hedge funds
     d. Hedge fund prominence in industry, style drift, mergers and acquisitions involving hedge funds

SEGMENT 6:

Elizabeth Shea Fries, Head of Hedge Fund Practice, Goodwin Procter LLP

- The scope of the rule
     a. What is a "pooled investment vehicle" and what is not?
          (i) Certain funds (e.g. real estate funds) may use an exemption that excludes them from coverage of the rule.
          (ii) Each fund should consider carefully the investment company exemption on which they will rely.
          (iii) Are offshore funds relying on "Touche Remnant" covered? Consider in particular a public non-US fund that sells to one US institution - is that adviser fully subject to the rule for all communications?

     b. What is an "investment adviser"?
          (i) 202(a)(11) excludes banks, brokers in certain contexts and others.
          (ii) Non-US entities may also be subject to the rule.

     c. Scope is relevant because it can affect policies and procedures and general compliance matters, rather than avoidance of the rule.

- Practice Pointers/Suggestions
     a. Policies and procedures need to include a process to ensure compliance and avoid even "negligence"
          (i) Oral communications can be hard to monitor - training and scripts can help.
          (ii) E-mail communications - retention and monitoring.
          (iii) Review of documentation (including correspondence).

     b. Managers who have highly confidential portfolio information (e.g. in a venture capital or private equity context in particular) often are contractually prohibited from disclosing such information.
          (i) General legend suggestions - effectiveness remains unclear.
          (ii) Specific legends on key issues (such as pricing) - effectiveness remains unclear.