Litigation Partner, David Levy quoted in HFMCompliance “Disciplining Employees: Best Practices for Hedge Funds”

The article discusses policies and procedures hedge funds should have in place to monitor their employees and the course of action employers can take if they are violated. Disciplinary measures will largely depend on the infraction, and Levy notes “where there are significant disciplinary issues, you will often see a reduction or elimination of the discretionary bonus that most hedge fund employees depend on.” In larger funds, Human resources, the GC, CCO or a management committee may oversee disciplinary proceedings, which could result in reduction/elimination of bonus, probations on trading or executive committee review. Fund managers may also need to consider if self-reporting violations to the SEC or SRO is necessary, and Levy notes “Typically, in my experience, self-reporting is limited to extreme improprieties on the employees part which result in a loss to investors or limited partners.”