Prime Services C-Suite Newsletter – November 2023

Preparing for Year-End with SEC Updates, Trade Agreements, and Insurance Trends

Our monthly newsletter for multi-hat-wearing C-suite leaders covers the latest and greatest insights across the hedge fund industry.

Industry Insights:

Increased Activity: SEC Stats and Priorities. The SEC has released their 2024 exam priorities and figures around enforcements in 2023 showing an uptick in overall activity. Clients are engaging their compliance and legal teams to assist in navigating various key line items, performing gap analyses, and thinking about which processes will need to change to be compliant with the new rules.
- Exam Priorities. The SEC released their priorities which are primarily focused on new and recent rulings from the commission. Many new regulations have been finalized this year such as the Private Funds Advisory, Cyber Security, and Short Selling rules. Notably, ESG is no longer on the exam priority list despite the finalized Fund Naming rule.
- Yearly Increase. Over the past three years, there has been a 20% increase in enforcement actions by the SEC. In contrast, the amount of fines generated has been less linear with $1.4 billion fewer fines generated in 2023 compared to the previous year and $1.2 billion more in fines this year than in 2021.
Trade Agreement Best Practices. Going into year-end, trade agreements may be top of mind for some COO and CFOs. Some key considerations may include:
- Maintain levels of uniformity. When building trade agreements, infrastructure and operational considerations should be taken into account. This is especially important in the world of SMAs to maintain certain sets of uniformity from the trading standpoint.
- Have a short and long term view. COO and CFOs should aim for an overall picture of what the business may need as it evolves across asset classes. Be prepared for any sudden changes in plans, and ability to diversify where it makes sense.
- Build relationships across the firm and across asset classes. There is an importance in having these connections and viewing these relationship with the ability to shift and change.
- Ask the right questions. There is a need to understand what’s in your documents, where items may be lacking and what is the rational around what you’re doing. Additionally, groups should ensure their legal counsel is also involved in the process.
- Thanks to Lowenstein Sandler for providing their latest insights on the above.
Alternative Data: As funds continue to be consumers of alternative data, due diligence on vendors, keeping track of progress of the data, and understanding risks associated with these providers is top of mind. Groups are spending more time understanding needs around oversight and governance of these services as well as keeping inventories of who’s using it and how it is being used.
- Building Projects and Gaining Support. Many groups are starting to think about how to remain competitive in terms of data and are beginning to implement new processes. It can be critical to the implementation of these projects that users can understand the complexity of data and have the ability to achieve standardization around the data.

Please reach out to your Jefferies contact for more information on any of the topics above.

Client Corner:

Insurance Trends. Given the increase in enforcement actions by the SEC and higher legal fees, many fund managers are opting for increased D&O and E&O insurance coverage. Despite this, Fieldstone insurance Group noted a decrease in pricing overall per million dollars of coverage in the hedge fund market. Interestingly, this is not seen in other parts of the alternatives industry such as insurance coverage for PE or VC funds. Additionally, cyber insurance coverage is still growing across the client base and service providers in the space with close to half of funds purchasing coverage.

Spotlight on Content and Events:

Israel’s Economy and Financial Markets: Navigating Wartime.

Wednesday, November 29^th, 10:00–11:30am ET / 15:00–16:30 GMT / 17:00-18:30 IST

Join us as for a webinar hosted by the Israel Hedge Funds Association (IHFA) and Tel Aviv Stock Exchange (TASE) to highlight Israel’s Economy and Financials during Wartime.

Bank of Israel Governor will discuss the economy and role of the central bank, TASE CEO on the importance of the stock exchange and then Natti Ginor (JEF Head of Israel IB) will interview the CIO of Migdal (+$90 billion insurance and pension fund) and Co-Founder & Managing Partner of Sphera Funds (one of Israeli’s largest hedge fund managers).

REGISTER HERE