A rash of recent US Securities and Exchange Commission charges and fines levied against hedge fund managers for insider trading have raised worrying questions about the industry in SA, and whether the same risks apply. Hedge funds were classified as collective investment schemes in SA in 2015 and they are expected to become increasingly popular with institutional investors. The Financial Services Board (FSB) has approved the registrations of 24 hedge funds as collective investment schemes, managing a combined R76bn in assets, it has said. The funds use unconventional strategies to make money for investors, including short selling — borrowing shares from another party, selling them to others at prevailing prices, buying them back and returning them to the original owners when prices drop markedly. A number of US hedge fund managers have abused the strategy, with that country’s antitrust regulator pressing charges or levying fines this year against at least three hedge funds that ille...
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