SEC Brings a Pay-to-Play Action

The Securities and Exchange Commission filed a “pay-to-play” case against Goldman Sachs and one of its former investment bankers, Neil M.M. Morrison. The SEC alleges that Goldman and Morrison made undisclosed campaign contributions to then-Massachusetts state treasurer Timothy P. Cahill while he was a candidate for governor.

The case was brought under the Municipal Securities Rule on pay-to-play: MSRB Rule G-37. The SEC’s investment adviser/private fund rule on pay to play, Rule 206(4)-5, is based closely on that MSRB rule.

The SEC’s order found that Goldman Sachs did not disclose any of the contributions on MSRB forms and did not  keep records of the contributions in violation of MSRB rules.

Goldman Sachs agreed to settle the charges by paying $7,558,942 in disgorgement, $670,033 in prejudgment interest, and a $3.75 million penalty. This is the largest fine ever imposed by the SEC for Municipal Securities Rulemaking Board pay-to-play violations. The SEC’s case against Morrison continues.

According to the SEC’s order against Goldman Sachs, Morrison worked in the firm’s Boston office and solicited underwriting business from the Massachusetts treasurer’s office beginning in July 2008. Morrison was substantially engaged in working on Cahill’s political campaigns. Before joining Goldman Sachs, between January 2003 and June 2007, Morrison was employed by the Massachusetts Treasurer’s Office, which included positions as the first deputy treasurer, chief of staff and assistant treasurer, reporting directly to Cahill.

Morrison participated extensively in Cahill’s gubernatorial campaign, often during working hours from his Goldman Sachs office, and used Goldman Sachs resources (such as phones, e-mail and office space). The SEC claims that Morrison’s use of Goldman Sachs work time and resources for campaign activities constituted valuable in-kind campaign contributions to Cahill that were attributable to Goldman Sachs and disqualified the firm from engaging in municipal underwriting business with certain Massachusetts municipal issuers for two years after the contributions.

While Morrison was an employee and working on the Cahill campaign, Goldman Sachs participated in 30 prohibited underwritings with Massachusetts issuers and earned more than $7.5 million in underwriting fees.

According to the complaint, this seems like an egregious violation of the pay-to-play rules. It does highlight that items beyond cash contributions could be considered a “contribution” under the pay-to-play rule.

We would not consider a donation of time by an individual to be a contribution, provided the adviser has not solicited the individual’s efforts and the adviser’s resources, such as office space and telephones, are not used….

A covered associate’s donation of his or her time generally would not be viewed as a contribution if such volunteering were to occur during non-work hours, if the covered associate were using vacation time, or if the adviser is not otherwise paying the employee’s salary

Sec Release IA-3403 page 46 and footnote 157 (.pdf)

From a compliance perspective, the question is how to value the use of time in the office, email, and phone usage. I suppose you can add up long distance charges. For employees you can use their hourly rate to determine time spent.  For Morrison, it appears that even using a very conservative measurement  of his time and the Goldman resources, the value would be many times in excess of the $250 limit under the MSRB rule. (The SEC limit is $350 if you can vote for the person.)

Sources:

Compliance Bits and Pieces for September 28

These are some of the compliance-related stories that recently caught my attention:

Mass. Securities Chief Urges SEC to Establish Accredited Investor Methods under JOBS Act Reg. D Measure in Jim Hamilton’s World of Securities Regulations

In a letter to the SEC, the Massachusetts Securities Commissioner and Secretary of the Commonwealth William Galvin said that in the proposed regulations implementing the JOBS Act elimination on the ban on general solicitation under Regulation D the Commission has failed to meet its obligations under Section 201 of the JOBS Act to establish methods for issuers to use to verify that investors are accredited. In his view, this failure will put the interests of retail investors and savers at risk in unprecedented ways. This failure will also place unnecessary burdens on issuers, who could benefit from the Commission’s guidance on this important obligation. Also, the SEC’s failure to adopt meaningful requirements for the Rule 506( c) exemption will impede state and federal enforcement in virtually all cases involving unregistered offerings.

Private Equity Firms’ Use of Management Fee Waivers in Compliance Avenue

Potential Federal Tax Ramifications of Converting Management Fee to Carried Interest. The management fee is generally paid quarterly and treated as ordinary income for tax purposes, while “carried interest” generally qualifies for long-term capital gain treatment. Because ordinary income is taxed at a maximum federal rate of 35% currently, whereas capital gain is currently taxed at 15%, one tax benefit resulting from the “conversion” of management fee to carried interest is a significant reduction in the firm’s tax bill.

SEC Charges Goldman Sachs, Former Banker With ‘Pay-to-Play’ Violations by Bruce Carton in Compliance Week

The SEC announced today that it has filed a “pay-to-play” case against Goldman, Sachs & Co. and one of its former investment bankers. The SEC alleges that Goldman and Neil M.M. Morrison, a former vice president in the firm’s Boston office, made undisclosed campaign contributions to then-Massachusetts state treasurer Timothy P. Cahill while he was a candidate for governor.

Massachusetts seeks to deny registration to adviser by Dan Jamieson in Investment News

Massachusetts has filed a complaint against a midsize adviser for allegedly misstating assets under management.

When CCR applied for Massachusetts registration in June, the state began a “detailed review” of its prior regulatory filings with the Securities and Exchange Commission, Massachusetts regulators said in a complaint released Tuesday.

State examiners found “an illogical and inconsistent pattern in reporting assets under management,” the state said in a release.

For several years, CCR showed assets under management of “precisely $25 million” despite changes in the number of clients, said Brian McNiff , a spokesman for the Massachusetts Securities Division.

SEC Charges Investment Bank Analyst with Illegally Tipping College Friend About Nonpublic Merger Deals

The SEC alleges that Jauyo “Jason” Lee, who worked in the San Francisco office of Leerink Swann LLC, gleaned sensitive nonpublic information about the deals from unsuspecting co-workers involved with those clients and by reviewing various internal documents about the transactions, which involved medical device companies. Lee tipped his longtime college friend Victor Chen of Sunnyvale, Calif., with the confidential information, and Chen traded heavily on the basis of the nonpublic details that Lee had a duty to protect. Chen made more than $600,000 in illicit profits, which was a 237 percent return on his initial investment. Bank records reveal a pattern of large cash withdrawals by Lee followed by large cash deposits by Chen, who then used the money for the insider trading.

The National Labor Relations Board Sheds Useful Light on Key Social Media Policy Provisions by Philip L. Gordon in Littler’s Workplace Privacy Counsel blog

Between summer 2011 and spring 2012, the National Labor Relations Board’s (NLRB) Acting General Counsel drew substantial attention in his direction by publishing three lengthy Advice Memos, which expressed his views on the application of the National Labor Relations Act (NLRA) to social media policy provisions and employers’ discipline based on employees’ personal social media content. These memoranda, however, revealed only the litigation positions that the NLRB’s cadre of enforcement attorneys would take in this new and evolving area of the law. The views expressed in the memos did not, and do not, bind the Board. Last week, however, the Board issued an opinion, which, albeit not analyzing the employer’s social media policy per se, revealed the Board’s thinking on several employment policies commonly found in employers’ social media policies. Costco Wholesale Corporation, 358 N.L.R.B. No. 106 (Sept. 7, 2012).

Angel Capital Association weighs in on SEC proposed rule on general solicitation and accredited investor verification by William Carleton

The most controversial aspect of the SEC’s proposal has been its lack of any definitive safe harbor by which an issuer can be certain it has satisfied the amorphous “reasonable steps” standard of proposed Rule 506(c).

Why Have a Compliance Program?

I’m working on presentation for a continuing education program and decided to step back and look at the basics. I went all the way back to “why?”

You Are Required

Sometimes the answer is easy. You have to have a compliance program. Your company is in a heavily regulated industry that explicitly requires a formal compliance program. Or your industry is subject to big regulatory overhead and implicitly requires a formal compliance program.

For an example, see the SEC’s Investment Advisers Act Rule 206(4)-7. This rule explicitly requires a firm to appoint a chief compliance officer, implement a program, and it review it annually.

Defense – Federal Sentencing Guidelines

Another reason to have a compliance program is to reduce the repercussions of federal prosecution for illegal behavior. Under the Federal Sentencing Guidelines, a convicted organization is eligible for a reduced sentence if it had an effective compliance and ethics program in place at the time of the offense.  The Guidelines spell out several features that a compliance program must have for the organization to receive this credit.

Satisfying the requirements in the Guidelines for an effective compliance and ethics program is widely viewed as an important step in (i) avoiding prosecution altogether, (ii) positioning a corporation to advocate for a non-prosecution or deferred prosecution agreement, and (iii) mitigating the fine that must be paid if a non-prosecution or deferred prosecution agreement is negotiated.

Response to Crisis

Compliance programs can originate from a crisis facing an organization. Either because of prosecution or narrowly missing prosecution, the organization decides to implement a program to prevent the problem from happening again.

For an example, see the Federal Bureau of Investigation’s Integrity and Compliance Program. According to the FBI’s Patrick Kelley, the FBI’s Chief Compliance Officer in the Office of Integrity and Compliance, the Bureau’s program was modeled after corporate compliance programs. The precipitating event was a Congressional hearing on the possible abuse of National Security Letters by the Bureau. In addition to monitoring this one risk, the compliance program has been expanded to include the top 50 risks. These risks extend beyond core operations to things such as OSHA compliance.

Whistleblowers

With the passage of the Dodd-Frank Financial Reform and Consumer Protection Act, there is a new program to reward whistleblowers. Under the new program eligible whistleblowers are entitled to an award of between 10% and 30% of the monetary sanctions collected in actions brought by the Securities and Exchange Commission and related actions brought by other regulatory and law enforcement authorities.

Expect a dramatic increase in employees coming forward to report wrongdoing within their companies. The recent award of over $100 million to a whistleblower will surely increase the awareness of whistleblower financial rewards.

Reduce Risk and Deter Bad Behavior

A compliance program may not prevent all problems from occurring. If a problem arises, a good compliance program may isolate the incident and defer further prosecution.

For an example, see the SEC’s complaint against Garth Peterson. Mr. Peterson was a Managing Director of Morgan Stanley, located in Hong Kong and running the firm’s Chinese real estate investments. Mr. Peterson was accused of violating the Foreign Corrupt Practices Act and other illegal actions.  Starting in Section 23 of the complaint, the Department of Justice details many of the steps Morgan Stanley took to comply with the Foreign Corrupt Practices Act.

The program failed to prevent Mr. Peterson’s illegal behavior, but it did convince the Department of Justice not to prosecute the firm itself.

Sources:

Federal Sentencing Guidelines Section 8b2 – Effective Compliance and Ethics Program
http://www.ussc.gov/Guidelines/2011_Guidelines/Manual_PDF/2011_Guidelines_Manual_Full.pdf

SEC’s Complaint against Garth Peterson
http://www.sec.gov/litigation/complaints/2012/comp-pr2012-78.pdf

SEC’s Office of the Whistleblower – Frequently Asked Questions
http://www.sec.gov/about/offices/owb/owb-faq.shtml

SEC’s Investment Advisers Act Rule 206(4)-7
http://www.sec.gov/rules/final/ia-2204.htm

Federal Bureau of Investigation’s Integrity and Compliance Program
http://www.justice.gov/oig/reports/2011/e1201.pdf

No Language Barrier to Prosecuting Insider Trading

The Securities and Exchange Commission alleges that Waldyr Da Silva Prado Neto, a citizen of Brazil who was working for Wells Fargo in Miami, learned about an impending acquisition and profited illegally from insider information. The SEC was apparently undeterred by the language barrier in filing its action.

The SEC claims that Prado, while a registered representative at Wells Fargo, traded on material nonpublic information. Prado is contesting the charges, so the SEC allegations may not be accurate, but I’ll assume they are for trying to learn some lessons from the prosecution.

Prado had a large customer who put $50 million into a 3G Capital partners fund. That fund ultimately took Burger King private. The Customer and Prado met several times. A short time later Prado began trading in Burger King securities. Then another customer of Prado began trading in Burger King securities.

The SEC produced excepts of email in its complaint against Prado, translating from the original Portugese.

“Prado’s emails and other communications may have been sent from Brazil and written in Portuguese, but our commitment to prosecute illegal insider trading on U.S. markets knows no geographic or language barrier.”

– Sanjay Wadhwa, Deputy Chief of the SEC Enforcement Division’s Market Abuse Unit and Associate Director of the New York Regional Office.

Prado’s e-mail translated from Portuguese: “I’m in Brazil with information that cannot be sent by email. You can’t miss it….” Prado later placed a phone call to this friend on a phone call that night that he heard 3G Capital was going to take Burger King private. That friend was a hedge fund manager. Instead of trading on the information, he warned Prado that he should not trade on this information and should not encourage any of his customers to trade either. That did not deter Prado.

The difference in this case, compared to the Well Advantage case of foreign traders or the Sanchez case for Potash, is that Prado was a US based registered representative. So his communications are likely well preserved for the SEC to find the smoking gun linking him. You can see the emails in the complaint. The SEC got to use Prado’s words against him.

The SEC could not find the emails in the Sanchez case and I would guess they will also fail to find the smoking guns of insider trading in the Wells Advantage case.

Missing from this fact pattern is what happens to the Customer who breached his confidentiality agreement and told Prado about the upcoming transaction.

Sources:

Recent SEC Document Request for Private Equity

It appears the Securities and Exchange Commission has started its initial examination program for newly registered investment advisers, including private equity fund managers. This is a recent document request list sent by Boston’s regional office:
August Boston document request (.pdf).

The request list is shorter than the typical request letter. This seems to be in line with the earlier announcement that the SEC intended to make brief visits to lots of newly registered advisers.

Let me know if you have been visited by the SEC under this new program.

 

Senate Races and SEC Limits on Political Contributions

Last year a new rule from the Securities and Exchange Commission went into effect that limited the ability of investment advisers and private fund managers to make political campaign contributions. The purpose was to prevent some illicit pay-to-play activity by government officials who control government sponsored investment funds. With the close of the national political conventions and selection of the Republican and Democratic tickets, it’s clear how the pay-to-play rule for investment advisers will affect the presidential fund-raising.

It won’t.

Let’s take a look at Congress and see how  Rule 206(4)-5 affects campaign contributions for some of the currently competitive Senate races.

Connecticut

Chris Murphy is currently a member of the US House of Representatives. Therefore, donations to him would not be limited by the rule.

Linda McMahon does not currently hold a political office. She was the former CEO of World Wrestling Entertainment. Therefore, donations to her would not be limited by the rule.

Indiana

Joe Donnelly is a member of the U.S. House of Representatives. Therefore, donations to him would not be limited by the rule.

Richard Mourdock is the current  State Treasurer of Indiana. That position raises a red flag and requires further research. The Treasurer or his nominee serves on the Board of Trustees of the Indiana Public Retirement System, the state’s largest pension system. If your firm want access to those government investment funds, you will need to limit donations to Mr. Mourdock.

Massachusetts

Scott Brown is the incumbent Senator. Therefore, donations to Mr. Brown would not be limited by the rule.

Elizabeth Warren is a professor at Harvard and does not currently hold a political office. Therefore, donations to her would not be limited by the rule.

Missouri

Claire McCaskill is the incumbent Senator. Therefore, donations to her would not be limited by the rule.

Todd Akin is a Republican member of the United States House of Representatives. Therefore, donations to him would not be limited by the rule.

Montana

Jon Tester is the incumbent Senator seeking reelection. Therefore, donations to him would not be limited by the rule.

Denny Rehberg is currently a member of the US House of Representatives. Therefore, donations to him would not be limited by the rule.

Nevada

Shelley Berkley is a member of the United States House of Representatives. Therefore, donations to her would not be limited by the rule.

Dean Heller is the incumbent Senator. Therefore, donations to him would not be limited by the rule.

North Dakota

Heidi Heitkamp is a former Attorney General, but does not currently hold a political office. Therefore, donations to her would not be limited by the rule.

Rick Berg is a member of the United States House of Representatives. Therefore, donations to him would not be limited by the rule.

Ohio

Sherrod Brown is the incumbent Senator. Therefore, donations to Mr. Brown would not be limited by the rule.

Josh Mandel is the current Treasurer of Ohio. Donations to Mr. Mandel are limited by the rule. The Treasurer appoints members to the state retirement system boards who select investment and investment advisers.

Virginia

Tim Kaine is a former Governor of Virginia. Therefore, donations to him would not be subject to the rule. If he was still the sitting governor, donations to him would have been limited.

George Allen is also a former Governor of Virginia and was a former US Senator from Virginia. Therefore, donations to him would not be subject to the rule. If he was still the sitting governor, donations to him would have been limited.

Wisconsin

Tammy Baldwin is currently a member of the US House of Representatives. Therefore, donations to her would not be limited by the rule.

Tommy Thompson was a former governor of Wisconsin, but does not currently hold a political office. Therefore, donations to him would not be subject to the rule. If he was still the sitting governor, donations to him would have been limited.

Also keep in mind that contributions to state and local political parties are also limited by the rule.

Even if the contributions to a particular candidate are not limited by the rule, an investment adviser is still required to keep a record of all campaign contributions.

Senate Map is from Real Clear Politics

The Vice President and SEC’s Pay to Play Rule

Now that the Democratic and Republican conventions have ended and the presidential tickets are final, we can look at how the SEC’s new rule on political contributions will affect the November election. It won’t.

Early in the Republican contest for the nomination, Rick Perry was on the watch list under Rule 206(4)-5. Since he could directly or indirectly control several state pension funds in the State of Texas, contributions to Governor Perry would be subject to the rule. That means limiting contributions to $350.

It’s clear how the rule worked for Presidential nominees. It was not clear to me how the rule would work with the vice presidential candidates. The office itself does not control a government pension fund. But you need to look to the candidates current office as well under the Rule.

If Mr. Romney had selected a sitting governor, such as New Jersey’s Chris Christie, the SEC rule would have limited political contributions to the Republican ticket. In most states, Governors appoint board members for the state pension funds. It’s not clear whether that nomination would have tainted past contributions to the Republican campaign.

With Mitt Romney’s selection of Paul Ryan as his vice presidential running mate, we don’t have to look for the answer yet. Mr. Ryan is an incumbent U.S. Congressman and is not associated with selecting advisers or investments for a government pension fund.

Based on a quick glance of the other tickets, it looks like the pay-to-play rule does not apply to most of the other political parties looking to grab a few votes in November.

The Libertarian Party is on the ballot in most states. It’s candidates Former Governor Gary Johnson (New Mexico) and
Former Superior Court Judge Jim Gray (California) do not currently hold political office.

The Green Party weaved its way through the ballot process and managed to get on the ballot in about half of the states. Neither Dr. Jill Stein (Massachusetts) nor Cheri Honkala (Pennsylvania) currently hold political office.

I’m a bit confused by the ballot of the Party of Socialism and Liberation. Their presidential candidate, Peta Lindsay, and their vice presidential candidate, Yari Osorio, are both under the Constitution’s mandated minimum age for their respective offices. In addition Mr Osorio is foreign born, making him further ineligible to hold the office.

I have no comment on Rosanne Barr’s presidential campaign.

Real Estate Investment Fraud or Securities Fraud?

Looks like a great investment?

The SEC announced an asset freeze against Western Financial Planning Corporation and its principal Louis Schooler. At first the situation sounded like a complaint against a real estate investment fund, but after reviewing the complaint, I found it to be a much more twisted tale.

The defendants have not agreed to settle with the SEC, so the statements in the SEC’s complaint may or may not be accurate. I’ll assume so for purposes of finding some lessons.

The first issue is that Western was originating land investment deals and then selling them to investors. Nothing wrong with that, except for a big disclosure issue. According to the complaint, the aggregate price paid for investors in the land ownership was far in excess of the purchase price paid by Western. In one case the investors contributed $1.85 million for an undeveloped parcel of land in Stead, Nevada that had a fair market value of $355,000.

A second issue was that Western was publishing investment brochures that hyped the value of the land and seemed to be marking the value improperly.

Defendants continue to use incomparable “comps” to solicit investors.

The complaint cites an email sent to an investor comparing Western’s land to a nearby parcel purchased by Wal-Mart. Western paid $2.50 per square foot while Wal-Mart paid over $8 per square foot. Unfortunately for the comparison, Western failed to mention that its land lacked entitlements, zoning, grading, or groundwater rights.

One thing that bothered me in the complaint was that the investments were structured as general partnerships. That seemed very old school and could open the investors to claims since the entity lacked a liability shield. Then it dawned on me: securities. Western was probably taking the position that the general partnership units were not securities.

For a general partnership, those interests are generally not securities because they fail to satisfy the “from the efforts of others” part of the test of a security. Usually all general partners have decision making power with respect to the affairs of the partnership.

According to the complaint, Schooler exercised control over the general partnerships through the use of signatory partners and secretaries.  The secretaries were Western employees who ultimately controlled the bank accounts and executed documents.

Accordingly, the investors’ purchase of GP units was an investment of money in a common enterprise, and the investors holding those units were led to expect profits solely from Defendants’ efforts in managing, overseeing, and eventually selling the underlying property, Moreover, the GP Agreements left so little power in the hands of the investors that the GPs actually distributed power and functioned as if they were limited partnerships.

Western’s website gives the partnerships a different slant:

These investment groups are created within the structure of a general partnership. Each investment group stands apart from Western Financial; we do not manage the groups. We like to think of each one as a “mini-democracy.” All decisions are voted upon by members who own interest in the partnership, and no action is taken without a vote-by-ballot. A signatory partner is selected from the members who is authorized to sign on behalf of the group, but only after a vote. No one employed by Western Financial is eligible to vote in any of the general partnerships even though they may own an interest in a partnership. [My emphasis]

It sounds very American to own a piece of a mini-democracy. But unfortunately, it sounds like the investors got a bad deal.

Sources:

Compliance Bits and Pieces – Private Fund Advertising Edition

Last week’s release of the SEC’s game plan for allowing advertising for the private placement of securities will cause a big shift in what the public is able to see. As stated in the release of the proposed rule, the private market is nearly as big as the public capital markets. In 2011, $895 billion was raised through Rule 506 private placements while only a bit more, $984 billion was raised in registered offerings. This trend has been true for several years for Regulation D fund raising. Here is a round up of commentary on the proposed rule:

Proposed Rule Regarding General Solicitation and Advertising by Mary L. Schapiro in the Harvard Law School Forum on Corporate Governance and Financial Regulation

I believe that the proposed rules fulfill Congress’s clear directive that issuers be given the ability to communicate freely to attract the capital they need, while obligating them to take steps to ensure that this ability is not used to sell securities to those who are not qualified to participate in such offerings.

Increasing the Vulnerability of Investors by Luis A. Aguilar in the Harvard Law School Forum on Corporate Governance and Financial Regulation

I cannot support the proposal, because it presents a framework that is not balanced and that fails to address the acknowledged increased vulnerability of investors. In fact, there is no consideration of any of the commenters’ proposals that would have decreased investor vulnerability.

Sen. Levin Urges SEC to Enhance Investor Protections in Proposed Rules Implementing JOBS Act Ending of General Solicitation in Jim Hamilton’s World of Securities Regulation

Senator Carl Levin (D-MI), Chair of the Senate Investigations Subcommittee, urged the SEC to improve the investor protection aspects of proposed regulations implementing the elimination of the ban on general solicitation in Regulation D effected by the Jumpstart Our Business Startups (JOBS) Act. In his statement, the Senator specifically asked the SEC to require those who advertise private deals to take steps to ensure that investors have the information and expertise to make these risky investments. The Commission should also require that the content of the advertising satisfies some minimum standard, such as those that mutual funds are currently subject to. The proposed regulations do neither, said Chairman Levin, adding that they undermine investors protections, put at risk the investments of ordinary citizens, and ignore years of experience and law.

New SEC Rules Practically Require Hedge Funds To Advertise On DealbreakerBy

The day when you can advertise your hedge fund on Dealbreaker creeps ever closer, so claim your spot now because they are going fast.* The SEC has shown some justifiable skepticism about implementing the JOBS Act, and at least SEC-ster thinks that it’s been dragging its feet on the hedge fund advertising rules, but still, it has to be said, when the SEC was told to let you advertise your hedge fund, they really let you advertise your hedge fund. Soon you will be able to:

  • say whatever you want about your hedge fund, and
  • not say whatever you don’t want to say about it, as long as
  • you take reasonable steps to actually sell it only to accredited investors.

To generally solicit, or not to generally solicit? by William Carleton

A lot was at stake. I had said the rules could prove disastrous to angel investing, should the SEC specify methods of “verification” of accredited status that were too onerous for companies, or too invasive of investors’ privacy.

But disaster didn’t happen.

Hedge Fund Advertising is right around the corner… FINALLY! in HedgeCo.Net

We can now also offer hedge funds the ability to advertise their fund to our large user base. We can target different types of investors (ie: family offices, high net worth, etc.), we can target investors looking for certain styles of funds, assets under management, sharpe ratio, etc. These types of tools and others we have created specifically for hedge funds will be very powerful for firms who are looking to grow their AUM going forward. Also, as a result of owning not only HedgeCo.Net but also owning several other well trafficked hedge fund websites and having established relationships with hedge fund publications both online and offline, we have created the first Hedge Fund Advertising Network.