Hedge Fund Reader : Hedge Funds Leave SEC

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July 23, 2006

Hedge Funds Leave SEC

The impact of the ruling that hedge funds do not have to register with the US Securities and Exchange Commission (SEC) has spread deeper into the hedge fund industry. A month on, and ten hedge funds have left the fold – they have withdrawn their registrations with the SEC. This comes as a slap in the face for the regulatory body after the blow dealt by the court which threw out the regulation that mandated hedge fund advisers to provide basic information about their funds to the SEC and allow it a peek into their operations. Reuters Today reports:

The court ruling essentially allowed hedge funds advisers, if they wish, to deregister with the SEC. When the court decision was made the SEC had on record more than 2,500 advisers who managed more than 13,800 hedge funds.

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July 23, 2006 in Regulation | Permalink

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I am a partner at Stillwater Capital, and we feel strongly that all hedge fund managers with more than $25 million under management or more than 14 clients should register with the S.E.C. We have been registered with the S.E.C. and went through a thorough but appropriate audit last summer. When I saw the level of detail that they paid attention to, I was very excited about the possibility that EVERY hedge fund that We invest in would be subject to these periodic audits without a lot of notice. (Our Stillwater Asset Backed Lending business invests money with other asset backed hedge funds which are complex and difficult to do the due diligence work on. If every one of these funds were audited by the S.E.C., we would feel much safer and more certain about investing in them.)
That being said, the best way to regulate the Hedge Fund Industry is for S.E.C. to require that every manager publish or make public their assets (in general, without specifics) via independent administrators and brokers on a monthly basis. That would further deter greedy and reckless managers from fraud. Our decision to register with the S.E.C. was a good one and we hope managers follow our lead

Posted by: Jack Doueck | Jul 31, 2006 12:03:19 PM

Hedge Funds will be under a cloud until the SEC steps in and regulates all of a certain size ($25 million and above). The hedge fund industry has everything to gain by the increased regulation and scrutiny, even though expenses will go up.
Jack Doueck
Stillwater Asset Backed Strategies
Stillwater Capital

Posted by: Jack Doueck, Stillwater Asset Backed Strategies | Sep 19, 2006 2:53:32 PM