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Conflicts of interest in the hedge fund industry

Legal Op.

Possible-Conflict-of-InterestConsidering the number of different parties that contract or interact with a hedge fund, it is evident that each of them might pursue a personal commercial interest.  Therefore, conflicts of interest are to be expected.  Simply put, a conflict of interest arises when the considerations of one party is to the detriment of another.  While it is impossible to establish an exhaustive list of all of the risks of conflicts of interest that may arise, it is nevertheless possible to enumerate a few of them that may occur within the hedge fund industry.

Cross Trades – When the hedge fund manager arranges buy and sell trades in the same security between different funds or accounts under their management. The conflict of interest arises due to the manager’s role in managing two funds or accounts, each of which should be treated equitably as regards the sale and purchase price between the two funds or…

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