Alternative Investment News reported that in-house counsel at investment management firms said they are continuing to see a decline in the use of side pockets, side letters and soft dollars.
The Securities and Exchange Commission has been reviewing side letter and side pocket use at hedge fund managers, while soft dollar use has been steadily declining.
Ashleigh Swayze, chief operating and compliance officer and general counsel at Gleacher Fund Advisors, said the use of side letters has decreased and some hedge funds are not using them at all.
With the regulatory scrutiny, firms are now avoiding things they once made use of, such as side pockets, said Christy Stagemeyer, assistant general counsel in the Alternative Investment Group at Bank of America.
In addition to the SEC, regulators including the Hong Kong Securities and Futures Commission and the International Organization of Securities Commissions have been looking into side letter use.