united-states civil-law
Can a hedge fund manager in the United States be sued for taking on too much risk?
<p>Can a hedge fund manager in the United States be sued for taking on too much risk? I am wondering if a hedge fund manager can take extremely bold risks with his fund as long as they state that such a thing can occur, or there's still a risk that you can be sued and lose the case in court. What does the law say on this?</p>

<p>The United States has two levels of security regulation, federal and state.</p>
<p>At the federal government level and in most states, the regulation is almost exclusively a matter of disclosure. The venture can be as risky as desired so long as the risks are fully and accurately disclosed.</p>
<p>A few states have (or did have until recently and could again have in the future) &quot;substantive&quot; regulation that outright prohibit certain kinds of high risk investments even if the risks are fully disclosed.</p>
<p>Hedge fund managers also have obligations arising from the organizational laws of state law entities. Many states have non-waiveable duties of entity managers, but some permit any obligations of an entity manager to be waived in an organization's governing documents.</p>
<p>Of course, there are some very high risk activities that are simply illegal no matter who conducts them, in matters of high non-investment risk to the general public.</p>
<p>For example, it is illegal to light cooking fires or do weed burning in drought stricken areas of the arid west during a fire ban, or to operate a nuclear power plant without a license.</p>
