| European Hedge Fund Managers may have to register in the US |
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| 25/07/2004 | |
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In a move that could lead to the dual regulation of European hedge fund managers, the Securities and Exchange Commission (SEC) voted to publish for comment a rule that would require all hedge fund managers to register with the Commission under the Investment Advisers Act. Foreign hedge funds advisers do not currently fall under the SEC regulation, while many hedge fund advisors are not required to register under the Advisers Act on the basis of a rule that allows advisers to count the fund rather than its investors. According to the SEC, about 40 to 50 percent of hedge fund managers are already registered with the Commission The new rule would require all hedge fund managers with 15 or more investor clients in a fund and more than US$25 million under management to register under that Act and be subject to the SEC's authorisation, oversight and supervision. The manager would also be required to "look through" their fund and count each investor in a fund or fund of funds as a client. Managers with US clients would have to comply with the SEC's new regulation. This proposal, which stems from the publication of a SEC staff report entitled "Implications of the growth of hedge funds" back in March 2004, had the Alternative Investment Management Association (AIMA), the hedge fund industry lobby group, raised its eyebrows on fears that dual regulation could lead to conflicting situation for non-US advisers. The registration process under the new regulation would permit the Commission to collect and provide to the public basic information about hedge funds and hedge fund advisers, including the number of hedge funds operating in the United States, the amount of assets, and the identity of their advisers. It would also allow the Commission to examine hedge fund advisers to identify compliance problems early and deter questionable practices in a bid to prevent fraud, which the AIMA says is already performed by the regulator of the country of origin of the fund. The proposal almost fell short from being adopted after two of the SEC Republican commissioners voted against it, but the Chairman's commission, William Donaldson, tipped the balance in favour of its adoption in a 3-2 positive vote. "The registration process is a very simple, basic step that will provide the commission data as to the size of the hedge fund industry and how fast it is growing," testified Donaldson last week before the Senate Banking Committee. Comments on the proposed provisions have to be submitted to the Commission by September 15th, 2004. This e-mail address is being protected from spam bots, you need JavaScript enabled to view it |
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