MFA Pushes For End To Hedge Fund Marketing Ban

Jan 17 2012 | 12:05pm ET

The U.S. hedge fund industry has asked the Securities and Exchange Commission to junk a nearly 80-year-old rule that all-but prevents alternative investments firms from marketing or speaking to the press.

The Managed Funds Association, the industry's primary lobbying body in the U.S., complained that rule 502(c) of Regulation D now covers an industry that "would be unrecognizable to" its "original drafters" in 1933. What's more, the rule is unnecessary, as other rules restrict hedge fund investments to the wealthy, and actually harms the industry's transparency.

Due to the rule, "managers generally take a cautious approach and strictly limit all types of communications about their business," MFA President Richard Baker wrote. "For example, private fund managers generally will not respond to press inquiries, even to correct inaccurate reports."

Under the terms of rule 502(c), speaking to the press could constitute illegal marketing of an unregistered security.

The rule also could be read to prevent hedge funds from disseminating any information, even truthful, other than to qualified investors. Many hedge funds, even the largest, have perfunctory public Web sites so as not to run afoul of the rule.

"We hope this will take some of the mystery out of things and get rid of the legal complexity associated with marketing," MFA general counsel Stuart Kaswell said. "We believe it is the appropriate time for these rules to change and the industry wants to be more transparent."


In Depth

JOBS Act Propels Real-Estate Crowdfunding Platform

Oct 21 2014 | 2:57am ET

If D.J. Paul were a real estate development, he would be described as “multi-use...

Lifestyle

Strippers Accused Of Robbing Hedge-Fund Manager Face Jail

Oct 20 2014 | 9:20am ET

A group of alleged stripper-thieves—whose victims include a hedge-fund manager...

Guest Contributor

PAAMCO: European Equity Exposure - Challenging Year, But All is Not Lost

Oct 16 2014 | 4:12am ET

European equity hedge fund managers have had a tough time so far this year. The...

 

Videos

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

October 2014 Cover

Deeply flawed risk benchmark

Most traders agree that proper risk management is the key to successful trading. However, many traders depend on the deeply flawed measure of standard deviation as a benchmark of risk. Here we put it ...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.