Nora Jordan recollects that Duke Law School, in North Carolina, was “extremely good at training me how to think like a lawyer and how to analyse issues”. But she notes that this was “only half of what I needed to know to become a good lawyer”. Knowledge of how to apply that analysis practically only came after practising at Davis Polk & Wardwell LLP, where she was trained to come up with solutions, not issues, for clients. Jordan declines to name particular mentors at Davis Polk, because “everyone is a mentor” due to the firm's lock-step compensation system which engenders an “all for one and one for all” culture where each person’s success depends on the success of others.
The Davis Polk investment practice that Jordan leads does not seek to represent every hedge fund, or thousands of hedge funds, but “rather to represent the most sophisticated hedge funds”, with Jordan estimating that at least 60% of the world’s top 20 hedge funds are clients, including Bridgewater Associates. That said, there is no formal minimum asset size and sometimes Davis Polk takes a constructive view on new funds. For instance, when Vikram Pandit left Citi to start Frontpoint, Davis Polk represented him from the start-up phase through to when he sold it to Citi.
New regulations over the past five years have “completely changed the landscape” for private funds as “both US and EU hedge funds and their managers have gone from being lightly regulated to being very heavily regulated”. The growing intrusiveness of regulations is seen in reporting requirements such as Form PF, registration rules, clearing requirements for derivatives, more on-site inspections and proposed compensation restrictions in the EU. These regulations are generating more work for Davis Polk, as clients “wrestle with where and to whom they can offer their funds”, and also as clients “try to interpret new regulations such as Dodd-Frank and AIFMD”, particularly with complex new US rules for swaps and derivatives. Because the new rules are being implemented for the first time, compliance is a particularly time-consuming task for managers right now, but after procedures are drafted and put in place the compliance load should lighten.
Though some observers say regulators are too slow to implement Dodd-Frank, Jordan argues that “given the volume of rules, the regulators are doing a good job”, and she believes a few more months would not be long enough to implement the remaining 279 rules that must be put into effect as part of Dodd-Frank. Jordan is pleased that regulators have taken time to thoroughly think through and consult the industry about the 109 rules implemented so far, so that practical solutions are found “from the get go”. New European rules are also in a state of flux as each of the EU’s 28 member states can have different interpretations of one EU directive. For example, Germany is generally taking a stricter approach to marketing under the AIFMD than the UK. US hedge funds are “absolutely worried that European regulations could make it harder for them to market in Europe”, as they have to “go country by country to figure out if they can live with rules including compensation restrictions and requirements to have depositaries”.
Although there are exceptions to some regulations where there is a “reverse inquiry”, Jordan is hearing that “certain countries will be more restrictive in their interpretation” of what a reverse inquiry is, as opposed to an active solicitation, with Germany again taking a more restrictive approach than the UK. It seems that the babble of many interpretations here is turning into “a nightmare” and that a more harmonised and predictable approach would be welcome. Jordan does not see a “big rush to UCITS” in lieu of AIFMD compliance, because managers “have realised that UCITS is a retail product with its own issues”. Globally, Jordan sees a growing convergence of approach to fund regulation by US and EU regulators, particularly on compensation, transparency, and disclosure, and notes that Asia currently offers a less onerous regulatory environment.
Some aspects of fund regulation, particularly those concerning proper financial market conduct, are of course not so new – such as insider trading rules, which can have civil and criminal dimensions. This is one of many areas where Davis Polk “spends a lot of time providing preventative advice”, because naturally their hedge fund clients “want to do the right thing”. Jordan notes that clients are frequently asking for advice on how to monitor for and prevent trading on inside information, and sometimes – always on an urgent basis – seeking Davis Polk’s opinion on whether particular information is likely to be classified as “inside information”. Davis Polk has also been asked to do internal investigations as a result of whistleblower complaints, in one instance where a chief compliance officer complained in writing of improper conduct and then resigned. Recently Davis Polk represented Scottish manager Martin Currie in negotiating settlements with theFSA and SEC in relation to a conflict between a hedge fund and a mutual fund.
Yet despite all of this, Jordan is not convinced that every hedge fund needs its own full-time employee who exclusively handles compliance. She thinks at a small hedge fund with a simple strategy the compliance person could handle other duties, such as legal or operations. She notes though that large hedge funds with numerous strategies can need a team of compliance people. Jordan also thinks that “once the regulations get hammered out, compliance will get straightened out and become more routine”, and ventures that this might happen by 2015. Similarly, Jordan hopes that the annual need for substantial updates of her book on private fund regulation "will settle down soon”. Presently this exercise is “a huge undertaking” every year and will be even more arduous next year when AIFMD is added to the expanding tome.
Regulation and compliance should not overshadow other parts of Jordan’s practice, however. Her most rewarding work has been helping funds grow their businesses, through product launches or acquisitions. Witness the creation of the world’s largest broker via a joint venture between Morgan Stanley and Citi, which Jordan advised on. The merger between Morgan Stanley and Dean Witter was also groundbreaking in straddling institutional and retail businesses – just as Davis Polk’s practice does. Low-cost exchange-traded funds are one of the fastest growing investment vehicles and Davis Polk has been close to this trend, representing three of the largest ETFs, which have well in excess of $100 billion of assets combined.
Regarding women in hedge funds, Jordan believes that “in any business, diversity of viewpoint, attitude and approach is good – and clearly a lot of women have contributed to the hedge fund industry, as is evidenced by the list of 50 Leading Women in Hedge Funds”. Jordan attributes much of the success of her 30 years at Davis Polk to the firm – particularly in allowing her to work part-time whilst having children, and promoting her to partner level soon after she returned to full-time status. In the voluntary sphere, Jordan is also alert to growing trends. She sits on the board of the American Skin Association, which carries out research and education programmes on skin diseases, particularly melanoma, which is the fastest growing cancer in the world.
Biography
EDUCATION
• B.A. from the University of Notre Dame, 1980, cum laude.
• Received a J.D. from Duke University School of Law, 1983, with honours.
PREVIOUS ROLES
• Associate at Davis Polk & Wardwell, 1983-1995.
OTHER
• Board of Directors (Vice-Chair) at The American Skin Association.
• Board of Visitors at Duke Law School.
Nora Jordan was selected as one of The Hedge Fund Journal's 50 Leading Women In Hedge Funds 2013.