Annual audits of hedge funds are now in full gear. Fund administrators should assist auditors in disclosure of "soft compensation" for their clients so that investors are fully informed about compensation being paid. Administrators might inquire of the hedge fund manager, (especially if trading statements show commissions exceeding $1 or so per futures contract) if the IB or Trading advisor is receiving any type of "soft compensation" back from the clearing broker or its advisors. Then quantify the additional compensation based on the # of contracts, or from a schedule of receipts by the manager, and present it to the auditor in workpaper form for appropriate disclosure to the investors.
This type of compensation is often stealth to auditors. Usually auditors will rely on the trading statements for the clearing brokers. Nowhere is soft comensation paid to the manager or IB disclosed on the monthly trading statement.
Parisian Family Office, Founder & CEO. Started Wall Street, '82. Drexel Burnham alum in LaJolla, CA. Founded Native American Advisors, Chippewa Partners. '95. Chippewa. Conservative. Raised on reservations. Was NYSE/FINRA arbitrator. Trading O'Neil/CANSLIM methodology at PAMELOT, TN farm, GHOST RANCH, MT, on the Yellowstone River, or CASA TULE', their winter camp in Los Cabos, Mexico. Will always be, a relentless optimist with radical gratitude.
Parisian Family Office, Founder & CEO. Started Wall Street, '82. Drexel Burnham alum in LaJolla, CA. Founded Native American Advisors, Chippewa Partners. '95. Chippewa. Conservative. Raised on reservations. Was NYSE/FINRA arbitrator. Trading O'Neil/CANSLIM methodology at PAMELOT, TN farm, GHOST RANCH, MT, on the Yellowstone River, or CASA TULE', their winter camp in Los Cabos, Mexico. Will always be, a relentless optimist with radical gratitude.
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