It died on the vine last year, but Connecticut lawmakers have resurrected a bill that would impose new reporting requirements on hedge funds based in the state.
The Connecticut legislature’s banking committee held a hearing on the bill, which easily passed the Senate last year but did not receive a hearing in the House of Representatives, yesterday. Last year’s version of the bill would have forced hedge funds in the Nutmeg State to disclose any conflicts of interest between investors and fund managers.
That bill will be “a starting point” for this year’s version, sponsor and Banks Committee Co-Chairman Robert Duff said. Duff blamed inaction on the federal level—despite widespread support, even within the hedge fund industry, hedge fund regulation has been bottled up in Washington amidst disagreements on other parts of an overall financial regulation overhaul—for the return of the proposal.
“I’ve had a lot of people inside the industry tell me that I was right on with this bill,” Duff told the Hartford Courant. “Even in their opinion, we could go further.”
Not everyone in the world’s third-largest hedge fund center is quite so gung-ho.
John Brunjes, a partner with the law firm Bracewell & Giuliani and a member of the Connecticut Hedge Fund Association’s board of directors, called the Connecticut bill “duplicative of what is currently required under federal and state law.”
“It distinguishes Connecticut not as a state that is friendly for managers to do business here, but one that makes it more burdensome and in a way that does not appear to serve the goal of investor protection,” Brunjes told FINalternatives.
Brunjes warns that, if the bill were to become law, it could trigger an exodus of hedge funds from southwestern Connecticut to nearby Westchester County in New York.
“It takes very little for them to say, enough is enough, I’m headed over to Westchester,” he said. “Rents in White Plains are substantially less than class A space in Greenwich. It’s a significant enough motivator for them to realistically consider moving.”
Brunjes, who spoke to FINalternatives yesterday while in Hartford lobbying against the measure, concedes that the bill “has a fair chance of passing.” But he is stressing that momentum on the federal level appears to be returning, and that Connecticut’s regulation should “continue to be driven at the federal level.”