Mutual Fund Org. Wants Strict Rules For Hedge Fund Advertising

Jun 1 2012 | 2:13pm ET

The Investment Company Institute, a mutual fund lobby group, has asked the Securities and Exchange Commission to limit advertising by hedge funds and private equity funds.

In a letter to the commission, Paul Schott Stevens, the president and CEO of the ICI, told the watchdog that private fund advertising was “particularly susceptible to fraud” because such funds "often pursue investment strategies that are opaque" or "invest in securities that are difficult to value or relatively illiquid,” reports the Wall Street Journal.

The JOBS Act, recently signed into law by President Obama, lifts the 78-year-old ban on publicizing private securities offerings and the SEC has been given 90 days from the Act’s becoming law to write new rules governing such advertising.

Mitch Ackles, president of the Hedge Fund Association, a lobby group, sees the dispute as something of a David vs. Goliath scenario, given that mutual funds, as of the end of 2011, managed assets worth $23.8 trillion (according to the ICI) whereas hedge funds and funds of hedge funds managed $2.25 trillion (according to PerTrac).

Ackles says hedge funds have been restricted from providing “really meaningful information in the public domain” for almost 80 years.

“Today, you and I can walk by Tiffany’s, and see the jewels, even if we can’t afford them,” he told FINalternatives, pointing out that hedge fund investors must still be considered “accredited investors” to qualify. The ICI has also asked the SEC to raise the thresholds necessary to achieve “accredited investor” status.

Ackles says industry groups like his and the Managed Funds Association are “on the same page” on this issue and will be issuing a response to the ICI next week.

“Hedge funds are regulated, it is a fallacy to say that they are not,” says Ackles. “There is regulation for market participants. It is up to the regulators and the lawmakers to provide that guidance to the industry. However, I think it is very important to point out the JOBS Act is about creating jobs, the fact is, hedge funds do employ people, they do spend in the broader economy.”

 


In Depth

Fundraising for Mid-Sized PE Funds: Should You Use a Registered B/D?

Dec 6 2016 | 7:18pm ET

When does a fund sponsor need to use a registered broker/dealer when raising capital...

Lifestyle

Trump Attends 'Villains and Heroes' Costume Party Dressed As...Himself

Dec 5 2016 | 11:16pm ET

U.S. President-elect Donald Trump attended a "Villains and Heroes" costume party...

Guest Contributor

A Hard Look At Your ‘Soft’ Hedge Fund Marketing Information

Dec 8 2016 | 9:03pm ET

Conventional wisdom holds that due diligence examines quantitative as well as qualitative...

 

From the current issue of

Since the inception of Modern Trader, a core editorial theme has centered on the wisdom and power of crowds. Editorial emphasis has focused on companies and projects engaged in the collection and analysis of information. 

AVAILABLE NOW at BARNES & NOBLE

NEWSTAND LOCATOR