New Legislation Could Change CT Hedge Fund Business

April 9, 2009 ( - New legislation in Connecticut would require all hedge funds in the state to obtain a state-issued license and conduct an annual independent audit.

The legislation would also require the funds to disclose any fees and major changes in management strategies or executive ranks, Markets Media reports. If bills No. 953, 6477  and 6480  pass, the state would also ban investments in hedge funds from individuals with less than $2.5 million in assets or institutions with less than $5 million in assets.

Mitchell Nichter, a securities lawyer with law firm Paul, Hastings told Markets Media the new rules could drive hedge funds away from the state. “Connecticut want audits of every single capital account, which most hedge funds will find unnecessary and expensive,” said Nichter, a partner in the Investment Management Practice, according to the news report. “That is paternalistic and economically unrealistic.”

Nichter also said the minimum investment requirement could hurt many smaller funds looking for a market share.

Legislation to require hedge funds to register with the U.S. Securities and Exchange Commission (SEC) has already been introduced in Congress (see Grassley to Reintroduce Hedge Fund Legislation ).