SEC Says Alts. Firms Are Inflating Fees, Expenses

Apr 30 2014 | 1:39pm ET

The Securities and Exchange Commission has found that alternative investment funds are using phony service providers to boost their fees, Chairman Mary Jo White told a congressional committee yesterday.

White said that about 1,800 hedge and private equity funds have registered with the Securities and Exchange Commission. The regulator has found the bogus service providers and other issues, including improper assignments of some fees and expenses to companies owned by p.e. funds, during its reviews of the newly-registered companies.

The SEC chair said that more than half of the 400 p.e. firms that have been inspected were found to have inflated fees and expenses charged to companies they own. She said the findings were evidence that the SEC needs an increase in its $1.7 billion budget.

“The funding we are seeking is fully justified by our existing and growing responsibilities to investors, companies and the markets,” she said.

White also addressed the growing furor around high-frequency trading following the publication of author Michael Lewis’ new book, Flash Boys. Lewis argues that the practice amounts to front-running and has “rigged” U.S. markets.

White said that the SEC is looking closely at HFT but rejected Lewis’ allegations. HFT “is not unlawful insider trading,” and critics are confusing the difference between early access to information and the ability to “more quickly react” to it.


In Depth

Whisky Business: The Ultimate Liquid Alternative Investment

Sep 15 2014 | 7:02am ET

David Robertson knows his single-malt whisky—he was the Master Distiller at the...

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

Forex: What happened to the volatility?

There are two things currency analysts agree on: Currencies have never gone through such a period of low volatility and the dollar must lead the sector out of the current malaise.

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.