Hedge Funds’ Systemic Risk Disclosures in Bankruptcy

39 Pages Posted: 1 Nov 2013 Last revised: 24 Apr 2014

See all articles by Wulf A. Kaal

Wulf A. Kaal

University of St. Thomas, Minnesota - School of Law

Date Written: 2013


Hedge fund advisers’ systemic risk disclosure obligations under Title IV of the Dodd-Frank Act and SEC implementation rules may have unanticipated future applications and knock-on effects on other areas of the law and hedge fund practices. Federal Bankruptcy Rule 2019 (Rule 2019) has been the subject of intense professional and scholarly debate in the last several years. The federal bankruptcy bench, practitioners, and academics have debated the importance of the purported purpose of Rule 2019, the necessity for hedge funds to protect trading strategies and proprietary information, and the role of creditors and groups of creditors in the bankruptcy process. This paper adds another element to the debate by evaluating possible implications of systemic risk disclosures by hedge fund managers under Title IV of the Dodd-Frank Act and SEC implementation rules in the bankruptcy context. The author provides evidence of a substantial overlap between systemic risk disclosure requirements under Title IV and the disclosure requirements under the fully-revised version of Bankruptcy Rule 2019 (Revised Rule 2019). In the current regulatory framework, the threat of public disclosure of systemic risk filings by hedge funds via the bankruptcy process may only marginally affect hedge funds’ tactics and their role in distressed investing. Hedge funds’ disclosure obligations under the Dodd-Frank Act are still rather generic, the SEC has not yet standardized the requirements, and it is unclear if the SEC will expand the systemic risk disclosure obligations for hedge funds investing in distressed securities. The hedge fund industry’s continuous, expanding, and increasingly assertive presence in distressed securities investments could change this evaluation in the future.

Keywords: hedge funds, bankruptcy, securities law, Dodd-Frank, systemic risk disclosure

Suggested Citation

Kaal, Wulf A., Hedge Funds’ Systemic Risk Disclosures in Bankruptcy (2013). American Bankruptcy Institute Law Review, 2014, Forthcoming ; U of St. Thomas (Minnesota) Legal Studies Research Paper No. 13-33. Available at SSRN: https://ssrn.com/abstract=2348463

Wulf A. Kaal (Contact Author)

University of St. Thomas, Minnesota - School of Law ( email )

MSL 400, 1000 La Salle Avenue
Minneapolis, MN Minnesota 55403-2005
United States

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