Andrew Vollmer, a partner in the Securities Litigation and Enforcement Group at Wilmer Cutler Pickering Hale and Dorr LLP published “How hedge fund advisers can reduce insider trading risk,” in the Journal of Securities Law, Regulation & Compliance, Vol. 3, No. 2 (2010).
The article discusses some of the approaches that hedge fund managers use to prevent insider trading violations. They include avoiding agreements to keep information confidential and giving heightened attention to business communications between hedge fund personnel and close family members or personal friends. The article also describes the many legitimate reasons that analysts at money managers have to communicate in private with senior management of public companies and ways hedge fund advisers can police the insider trading risks associated with those communications.
The author has covered the topic from a legal perspective describing methods used to avoid being "brought behind the wall" unintentionally. However, the article does not discussed the way to avoid the intentional insider trading practices revealed recently at some well known hedge funds. As discussed, recently in my blog, the identification of fraudulent practices at hedge fund advisers is an arduous task. A dedicated compliance/legal department and pre-trading systematic compliance checks are good safeguards to avoid insider trading.
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