subject: Hedge Fund Management Liability -- New Risks in the New Economy [print this page] Hedge Fund Management Liability -- New Risks in the New Economy
As Bob Dylan once said, "The times, they are a changin'" -- which is perhaps the most accurate assessment of the hedge fund industry today. In the wake of huge scandals, one of the largest economic downturns in the past century, and a general distrust of the banking industry on the part of consumers, hedge fund managers face more risks today than ever before. And don't think for a second that financial attorneys are unaware of all the potential missteps a hedge fund manager can take. It is perhaps not too much of an exaggeration to say that an entire mini-industry has sprung up in the legal profession looking for hedge fund managers to make a mistake, an error in judgement, or even simply fail to provide the returns a client expects. The previously dog-eat-dog world of hedge fund management liability might now more accurately be described as shark-eat-shark.
And to some extent, it's easy to see why. Consumers have lost their entire financial lives and security to unscrupulous hedge fund managers and financial advisors, and your clients are scared that the same thing could happen to them. As a legitimate hedge fund manager, you're of course not going to make any intentional missteps -- but you could still be punished for things outside of your control in this new, uncertain economy.
Take for example the ever-present hedge fund management liability issue of promissory estoppel. Whereas in most past cases clients had little ground to seek damages for promissory estoppel if there was a contract in place between the plaintiff and defendant, new cases have come up that are changing the precedents in the industry. As recently as 2008 a client sued their financial manager for promissory estoppel despite the presence of a contract because they claimed that the managers had made oral promises to them regarding the way in which their funds would be used, then used them in a different manner, leading to financial loss on the part of the client.
This is just one example of how the world of hedge fund management liability is changing. Similar precedents are being set in common liability areas such as negligence, breach of contract, civil conspiracy, and even unjust enrichment, making it extremely easy for a hedge fund manager to get into serious trouble for even the most minor of infractions.
In lieu of such uncertain financial times, and with so many new legal precedents being set for hedge fund management and liability, it is more important than ever to know what you're up against. Old strategies of protecting yourself from hedge fund management liability claims are simply no longer feasible; it's time to update your financial management strategies and your personal protection strategies to work in the new economy.
