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April 04, 2006
Federal regulators to supervise hedge funds
As per the new rules from the Securities and Exchange Commission, hedge funds with more than $30 million in assets, 15 or more investors and a lock-up period of less than two years have to register as investment advisors under the Investment Advisors Act of 1940. Thanks to the mandate, there are new requirements that need to be addressed immediately. These include appointing a chief compliance officer, improving record-keeping practices and submitting to periodic audits from the SEC.
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. Charlotte.bizjournals.com reports:
Though long viewed as shadowy, high-risk investments, the number of hedge funds has risen from 600 to more than 8,000 in the last 15 years. Likewise, assets have soared from $38 billion to more than $1 trillion, and according to the SEC, hedge funds account for 10 percent to 20 percent of trading volume in the U.S. markets.
Read more: Hedge funds brought under supervision of federal regulators
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