Tag Archives: congress and hedge funds

NASAA Takes Sides on Proposed Hedge Fund Legislation

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Endorses House Bill Over the Grassley-Levin Hedge Fund Bill

Last week the North American Securities Administrators Association (NASAA) announced its support of the Hedge Fund Adviser Registration Act of 2009, a house bill introduced earlier this year by Representatives Capuano and Castle.  The Hedge Fund Adviser Registration Act is one of two bills introduced in Congress which would effectively require many unregistered hedge fund managers to register with the SEC.  The other bill, the Hedge Fund Transparency Act, was introduced into the Senate by Senators Grassley and Levin.  While the Adviser Registration Act would close what some are calling a loophole in the Investment Advisers Act of 1940, the Transparency Act would create a whole new regime for regulating hedge fund entities (as opposed to the management company).  The Transparency Act also came under fire earlier this year for being poorly drafted.

The NASAA support was announced in the release we have reprinted below.  If you have any questions on this issue, please feel free to contact us.  Related hedge fund registration articles include:

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May 28, 2009

NASAA Supports the Hedge Fund Adviser Registration Act of 2009 (H.R. 711)

Legislation Would Require Hedge Fund Advisers to Register with SEC

WASHINGTON (May 28, 2009) – The North America Securities Administrators Association (NASAA) today endorsed proposed bipartisan legislation that would require hedge fund advisers to register with the Securities and Exchange Commission under the Investment Advisers Act of 1940.

The Hedge Fund Adviser Registration Act of 2009 (H.R. 711), sponsored by Reps. Michael E. Capuano (D-MA) and Michael Castle (R-DE), addresses one of NASAA’s Core Principles for Financial Services Regulatory Reform – closing regulatory gaps.

“NASAA appreciates the efforts of Rep. Capuano and Rep. Castle to promote the regulation of hedge fund advisers in a manner that will provide greater transparency to the marketplace while not overburdening the hedge fund industry,” said NASAA President and Colorado Securities Commissioner Fred Joseph. “Advisers to hedge funds should be subject to the same standards of examination as other investment advisers.”

Because they qualify for a number of exemptions to federal and state registration and disclosure laws, hedge funds remain largely unregulated today. The SEC has attempted to require hedge fund managers to register as investment advisers, but that effort was overturned by a U.S. Court of Appeals decision. “Given the need for greater oversight and transparency in many corners of the financial services industry in the wake of the market meltdown, Congress should give the SEC explicit statutory authority to regulate hedge fund advisers as investment advisers,” Joseph said.

Joseph noted that the Managed Funds Association, which represents the hedge fund industry, now supports the registration of investment managers – including hedge fund managers – with the SEC. “This is a step in the right direction,” Joseph said. “While hedge funds did not cause the current economic and financial crisis facing the United States, they, along with the rest of the shadow banking industry, played a role. This reason alone is enough to require greater regulation of all parties in question.”

Joseph said NASAA will continue to press Congress for additional reforms of the hedge fund industry, including granting the SEC authority to require hedge funds to disclose their portfolios, including positions, leverage amounts and identities of counterparties, to the appropriate regulators; and appropriating the necessary funds to ensure that the regulators are sufficiently equipped, in terms of personnel and technology, to provide meaningful analysis of this data and to exercise proper oversight over hedge funds.

NASAA is the oldest international organization devoted to investor protection. Its membership consists of the securities administrators in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Canada and Mexico.

For more information:
Bob Webster, Director of Communications
202-737-0900

Hedge Fund Registration Becoming More Likely

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SEC Commissioner Calls for Hedge Fund Registration in Two Recent Speeches

In two separate speeches this year SEC Commissioner Luis A. Aguilar has called for hedge fund registration.  Commissioner Aguilar, appointed to the Commission last year, asked Congress to pass legislation amending the Investment Advisors Act to give the SEC authority to regulate hedge funds or hedge fund advisors.  Aguilar believes that increased regulation will provide the SEC with more information about funds and will also give the SEC the necessary tools to identify and potentially prevent misconduct prior to investor losses.  Continue reading →

Hedge Fund Taxation – Law School Professor Perspective

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Overview of Hedge Fund Taxation

The following is a reprint of the Joseph Bankman’s testimony before Congress.  Mr. Bankman is a professor at Stanford Law School.  While the testimony has a bias against the current hedge fund taxation structure, it provides a great overview of hedge fund tax issue, specifically the taxation of the hedge fund performance fee (also known as a “performance allocation,” “carried interest” or “carry”).  Ultimately the future of the hedge fund taxation regime will be decided in the political arena, but this article provides a good overview of the arguments for changing the current tax code.  Continue reading →

SEC Stands Behind “Fair Value” Accounting

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FASB may re-evaluate FAS 157 in light of recent market events

While the SEC does not directly control the manner in which hedge fund assets are valued for the purpose of striking a NAV for a fund, the SEC valuation policies are important for hedge funds in a number of different ways.  Maybe most important is that the SEC valuation guidelines require issuers of securities to adhere to certain valuation practices with regard to their own assets.  Recently Congress mandated the SEC reevaluate its valuation guidelines in light of the market collapse of 2008. Continue reading →

Hedge Funds, Congress and Madoff

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The Madoff scandal, which caught the SEC and savy institutional investors flat-footed, is increasing the pressure for more oversight and regulation within investment management and hedge fund industries.   It is expected that Congress will be busy with this and other matters regarding regulation of the capital markets.  In fact, Senator Chuck Grassley from Iowa recently announced his intention to require hedge fund registration at the SEC level.

In addition to Grassley, two more members of Congress are calling on greater oversight in the wake of the Madoff scandal.  Specifically Congressman Paul E. Kanjorski from Pennsylvania and Congressman Spencer Bachus from Alabama are calling on the House Financial Services Committee to hold hearings on the Madoff scanal.  I have reprinted the two notices below.  We will continue to provide information on possible hedge fund registration as it comes forward.  Related hedge fund law and registration articles include: Continue reading →