Friday, 30 January 2015
Last updated 3 hours ago
Jun 6 2012 | 9:04am ET
A hedge fund industry group is lauding the lifting of a ban on hedge fund advertising but wants the U.S. Securities and Exchange Commission to clarify its definition of an “accredited investor.”
The Hedge Fund Association, an international hedge fund lobby group, has written to the SEC in support of the newly liberalized advertising and solicitations rules contained in the recently passed JOBS Act. The letter comes a week after a mutual funds industry lobby wrote to ask the watchdog to continue to restrict hedge fund advertising.
The HFA sent its June 6 letter in response to an SEC call for comments prior to the publication of new regulations on July 5, 2012. In it, Richard Heller, chairman of the HFA’s regulatory and government advisory board, addressed some of the concerns raised by the Investment Company Institute, a mutual fund lobby, in its letter to the commission last week.
ICI President Paul Schott Stevens had 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.”
Heller said the ban would in no way weaken existing anti-fraud provisions forbidding people from using false or misleading statements to induce investors to invest in hedge funds. If anything, he wrote, “providing rules to strengthen a manager's decision to accept a subscriber's investment by following the rules to be drafted by the SEC that will for the first time provide a road map for managers to rely upon will, we believe, add further levels of compliance that the Dodd-Frank Act initiated.”
Under the new rules, hedge funds will still be restricted to selling their securities to accredited investors. Heller asked the watchdog to provide clearer rules to verify that investors are accredited to “add further stability to the industry.”
Hedge funds have been banned from soliciting or advertising their private offerings to the general public in exchange for being exempt from having to register their interests or shares with the SEC under Rule 506 of Regulation D. The HFA says the lack of a clear definition of a solicitation has “created confusion about what hedge fund managers can disclose in their marketing materials, at conferences or in the media.”
HFA President, Mitch Ackles says the association has written to the SEC to ensure regulators consider the views of the whole industry—“including service providers, investors and those smaller managers which represent a majority of hedge fund firms.”
The SEC was given 90 days from the signing of the JOBS Act into law to write the new rules.
Jan 23 2015 | 1:00pm ET
In our new section, FINtech Focus, we will profile one of these firms each week. While fintech is a broad category, we will be focusing on firms that specifically cater to the alternative investment industry. Read more…