Hedge Fund Group Supports Ending Advertising Ban

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.


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

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.