SEC Chairman Mary Jo White took her long-standing crusade against conflicts of interest to the hedge fund industry on Friday.
In a speech before the Managed Funds Association in New York, White called conflicts serious risks to firms, raising specific issues in the hedge fund industry.
White said examiners are finding some hedge fund advisors are allocating profitable trades and investment opportunities to proprietary funds rather than client accounts.
She added that hedge fund advisors may be shifting expenses away from themselves to funds and portfolio companies by charging a fund for the salaries of the advisor’s employees or hiring the advisor’s former employees as “consultants” paid by the funds. In addition, she said, advisors are collecting millions of dollars in accelerated monitoring fees without disclosing the practice.
