May 04, 2006
Hedge funds come under federal supervision
As per the new rules from the Securities and Exchange Commission, any hedge fund which has more than $30 million in assets, 15 or more investors and a lock-up period of less than two years will have to register as investment advisors under the Investment Advisors Act of 1940. Thanks to this mandate, there are quite a few new requirements that must be addressed immediately. Some of them include appointing a chief compliance officer, improving record-keeping practices and submitting to periodic audits from the SEC.
But there are some things no hedge fund will compromise on. Secrecy of investments is still of prime importance to the industry. So, though hedge funds must register with the SEC, they do not have to disclose their investments or investment methods, unlike mutual funds managers. And the hedge fund industry is not going to let go of this privilege. They are committed to fighting further regulation because according to them, maintaining the secrecy of investments and strategies allows it to exploit market anomalies. Looks like this is one area the SEC cannot breach.
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