Jason A. Scharfman's practical guide to building and managing hedge fund compliance programs covering regulation, technology, documentation, and real-world case studies.
Hedge Fund Compliance: Risks, Regulation, and Management breaks down everything you need to know about how hedge funds follow the rules. Written by Jason Scharfman, who trains financial regulators and consults with government agencies, this book takes a topic that sounds dry and makes it actually useful.
The book is organized into three sections. The first four chapters cover the basics - what compliance means, how regulators like the SEC operate, what a Chief Compliance Officer actually does, and how internal compliance teams are built. The middle section (chapters 5 through 8) gets into the tools and processes - compliance technology, outside consultants, key documents like the Compliance Manual and Code of Ethics, and how investors check if a fund’s compliance is legit. The final section brings it all together with real case studies, common mistakes funds make, interviews with compliance professionals, and where the industry is headed.
Whether you work in finance, invest in hedge funds, or just want to understand how the rules work behind the scenes, this book gives you a solid foundation. It’s especially useful for compliance professionals, fund managers, and investors doing due diligence on hedge fund operations.
Published by Wiley in 2017 (ISBN: 978-1-119-24023-5), the book remains relevant as compliance continues to grow in importance across the hedge fund industry. Scharfman draws on his experience as managing partner of Corgentum Consulting to provide practical templates, real examples, and actionable advice rather than just theory.
So I just finished reading “Hedge Fund Compliance: Risks, Regulation, and Management” by Jason A. Scharfman, and I wanted to share what I learned. This book is dense. Like, really dense. But the stuff inside is important if you want to understand how hedge funds actually follow the rules (or don’t).
Let’s start with the basics. What does “compliance” even mean? In simple words, compliance is how an organization follows the rules. Every industry has rules. Healthcare, construction, science, finance. The government usually writes these rules, but sometimes they come from other places too.
Chapter 2 of Scharfman’s book is all about regulation. Who makes the rules for hedge funds? Who enforces them? And what happens when the regulators actually show up at your door? Let’s break it down.
Every hedge fund needs someone who keeps things legal. That person is the Chief Compliance Officer, or CCO. Chapter 3 of Jason Scharfman’s book breaks down what a CCO actually does, what qualifications they need, and how the whole regulatory reporting process works.
In the last chapter we talked about the Chief Compliance Officer. The person in charge. But here’s the thing. One person can’t do everything. Even the best CCO needs a team. Chapter 4 is about how that team gets built and how the whole thing works together.
Technology runs everything these days. Hedge funds are no different. Chapter 5 of Scharfman’s book looks at how hedge funds use technology specifically for compliance. Not for trading. Not for making money. For following the rules and keeping records.
So far in this series we talked about in-house compliance. The people inside a hedge fund who make sure rules are followed. But here’s the thing. Sometimes that’s not enough. Sometimes you need to call in outside help.
Previous chapters talked about the people and systems behind hedge fund compliance. Chapter 7 shifts focus to paperwork. And yes, I know paperwork sounds boring. But here’s the thing: without proper documentation, a hedge fund’s compliance program basically does not exist. At least not in the eyes of regulators.
Up until now in this series, we talked about compliance from the hedge fund’s point of view. How they build programs, hire people, write policies. Chapter 8 flips the script. Now we look at it from the investor side. How do investors figure out if a fund’s compliance is actually good?
Chapter 9 is where Scharfman stops talking theory and starts showing what compliance looks like in practice. He gives us two hypothetical scenarios (basically role-play conversations) and two real SEC enforcement cases. Each one teaches a lesson about what can go wrong when compliance is treated as an afterthought.
Chapter 10 of Scharfman’s book is one of the most practical chapters so far. Instead of explaining rules or regulations, it focuses on six real mistakes hedge funds make with their compliance programs. Let me walk you through all six.
Chapter 11 is different from everything before it. Instead of explaining rules and frameworks, Scharfman sits down with real people who do compliance work every day. He interviews two compliance service providers and lets them talk about what they actually see in the field.
This is Part 2 of Chapter 11. If you missed Part 1 about compliance consulting, start there. This half covers the interview with Vinod Paul from Eze Castle Integration. The focus here is cybersecurity, cloud computing, data protection, and disaster recovery for hedge funds.
This is the last real chapter. Scharfman wraps up the book by looking ahead. What trends are shaping hedge fund compliance going forward? What should people in the industry worry about?
We made it. Fifteen posts, twelve chapters, and one very thorough book about hedge fund compliance. If you stuck with this series from beginning to end, thank you. That was a long ride.