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August 23, 2005
NASD for tighter control over funds of hedge funds
Hedge Fund industry has grown at a phenomenal rate but nothing much has been done to regulate its activities. Although SEC has imposed some basic regulations, but in the view of increasing spread of hedge funds, they seem to be highly inadequate. Recently brokerage watchdog NASD commented that the hedge funds which were previously only for the ultra rich and institutional investors, are now within the reach of not so rich individuals. These investors are primarily investing in funds of hedge funds where the initial sum to be invested is not too high. But these are investors who do not have a propensity for taking high risk and as such are quite vulnerable. As such they are quite a vulnerable lot and are easily swayed by false or misguiding claims. Last year Citigroup Global Markets was fined $250,000 for distributing inappropriate sales literature by NASD. This has been upheld as the largest enforcement action involving hedge funds. But in the view of the growth of the market, it is necessary to have more of these measures in order to ensure minimum cases of losses and fraud for the common man. Today.reuters.com reports:
“The SEC adopted the rule amid concern that hedge funds -- loosely regulated capital pools typically marketed to the wealthy and financial institutions -- were beginning to promote themselves to more moderate-income investors.”
Read More: US brokerages regulator eyes hedge fund sales
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