What are the regulations governing the formation of hedge funds?

The regulations governing the formation of hedge funds in New York are outlined in the Alternative Investment Law. This law was enacted in 2010 and provides a framework for the registration and regulation of alternative investment vehicles like hedge funds. Under this law, hedge fund managers must register with the New York State Department of Financial Services and disclose a number of items including the fund’s investment objectives, risk profile, and liquidity provisions. The manager must also provide audited financial statements and is subject to annual examinations by the department. The Alternative Investment Law also requires hedge fund managers to maintain accurate records and make them available for inspection by the department when requested. Managers must also provide quarterly reports to investors detailing all positions the fund holds, performance data, portfolio turnover, and investment fees. The law also dictates activities that are not allowed, including the acceptance of third-party compensation, the use of leverage, and proprietary trading. Finally, the law prohibits any kind of fraud, misrepresentation, or deceptive practices with regard to the offering or operation of a hedge fund. In the event of any violation, stiff financial penalties may be imposed.

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What are the regulations governing the formation of hedge funds?

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