Hedge funds are increasingly subject to international and local data protection regulations. The amount of personal data held by hedge funds and service providers continues to grow. As obligations to collect data increases with new regulations such as the U.S. Foreign Account Tax Compliance Act (FATCA), hedge fund managers and other service providers must pay attention to data protection laws and regulations.
The obligations of hedge funds, investment managers and service providers to protect confidential information relating to investors and avoid breaches of data privacy legislation is increasingly in focus. Hedge funds have long been required to obtain personal data on their investors as a result of anti-money laundering/know your customer requirements and investor suitability purposes. New regulations including FATCA will require that investment managers, funds and service providers obtain additional amounts of personal data. With the requirement to obtain increased amounts of personal data, combined with the penalties and reputational risks involved with the breach of data privacy legislation, this is an area that cannot be overlooked or ignored. This article will examine some of the issues on this topic, including the cross-border transfer of investor information and data.