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August 22, 2006
Most Hedge Funds to Stay Registered
A few days ago, I had written a post titled "SEC Not to Appeal Court Decision on Hedge Fund Rule" about the SEC's decision not to appeal against Appeal Court decision on hedge funds. A failed regulatory push by the Security and Exchange Commission (SEC) may have far-reaching consequences on the hedge fund industry. Hedge funds traditionally have been lightly regulated. Hence, SEC efforts to tighten the control met with criticism from the hedge fund industry and a federal appeals court. An SEC rule requires hedge fund advisers to register with the SEC and undergo routine inspections.
The ruling was rejected as "arbitrary" by the US Court of Appeals for the D.C. Circuit. While most hedge fund advisers said that they would remain under SEC oversight even though it is not mandatory, a significant number of hedge fund advisers said that they would deregister. The response given by hedge fund advisers suggests that hedge funds will stay registered.
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The best way to regulate the Hedge Fund Industry is for SEC 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 SEC was a good one and we hope managers follow our lead.
Jack Doueck
Stillwater Asset Backed Strategies
Posted by: Jack Doueck, Stillwater Capital | Aug 29, 2006 2:14:19 PM
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