Francis Facciolo, Assistant Director of the Securities Arbitration Clinic and Professor of Legal Writing, published an article, Exculpatory Clauses, in the February 2014 issue of The Investment Lawyer. The article was co-authored with Professor Facciolo’s former student and St. John’s law school alum, Leland Solon ’10, who is currently an associate at the Law Firm of Gary N. Weintraub, LLP.
Here’s an excerpt of the article:
This article describes how the SEC’s posi- tion on hedge clauses has evolved in light of the IAA’s anti-fraud provisions, culminating in the 2007 no-action letter of Heitman Capital Management, LLC,4 which granted new and unexpected leeway to advisers. In Heitman Capital, the SEC stated that it would no longer provide no-action guidance on hedge clauses; therefore, the only avenue for further develop- ment of the law in this area is in the courts or SEC enforcement actions. Although hedge clauses have been raised by plaintiffs in a number of cases, there has only been one case with a published opinion that addresses the effect hedge clauses have on a contract between an investment adviser and its advisee.
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