Hedge Fund Lawsuit Financing Poised for SEC Enforcement Scrutiny

The SEC’s enforcement lawyers and examiners are moving closer to gathering data on investments hedge funds make in support of litigation, as the financing arrangements grow in popularity.

The US Securities and Exchange Commission Aug. 10 proposed requiring private funds to report confidentially to the agency about their spending on litigation finance. The funding, which litigants and law firms use to cover their costs, has reached billions of dollars.

The potential reporting is part of a broader hedge fund transparency push by SEC Chair Gary Gensler, who said his agency is trying to better protect investors and monitor systemic ...