Hedge Fund Lobbyists Ask SEC to Consider Alternatives

October 18, 2004 (PLANSPONSOR.com) - The hedge fund industry's leading US lobbying group is pushing the Securities and Exchange Commission (SEC) to find ways other than registration to increase disclosure in the traditionally secretive industry.

The Managed Funds Association released a  statement on Monday  asking the SEC to consider alternatives so hedge funds would not have to register as a Registered Investment Advisor, which has been discussed at length by the SEC and industry experts (see  SEC Set To Recommend Hedge Fund Registration ). The proposed rule would require all hedge funds with over $25 million in assets under management and 15 or more clients to register.

Industry experts estimate that almost half of hedge funds are already registered. However, the SEC wishes to make it mandatory for all funds in hopes of forcing hedge fund managers to provide basic information about themselves to the regulatory body. Many hedge funds have protested, calling the move unnecessary and the start of a steep and slippery slope towards over-regulation.

During a comment period ending September 15 following the proposition of the  rule,  many hedge funds responded with alternatives to registration, according to Reuters. For example, some suggested dividing up regulatory oversight between regulators, while others suggested raising the minimum amount of money investors need in order to invest in the funds. The Managed Funds Association, in its release, asked that the SEC consider these options seriously as alternatives to registration. They also suggested that hedge funds only be required to submit to annual audits, with reports being made available to investors.

How seriously the SEC will take the recommendations and the request by the Managed Funds Association has yet to be seen. SEC Chairman William Donaldson has come out strongly in support of the move to register the funds, which may make it harder for anti-registration groups to have their wish (see  SEC Issues Hedge Fund Investor Warning ).