Tag Archives: hedge fund regulations

NASAA Takes Sides on Proposed Hedge Fund Legislation

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:


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

MFA Supports Hedge Fund Registration

MFA Lobbyist Testifies to Congress Regarding Hedge Fund Registration

In a somewhat surprising move, the MFA stated to Congress today that it supports registration for hedge fund managers.  Below is a press release regarding the statement.  The MFA also released its final written testimony to Congress which can be found here. CNBC has also produced a short news clip on this event which can be found here (note: you may have to watch a commercial for pajamagram).

I will continue reporting more on this issue and will also update this post once I have had a chance to review the written testimony.

News Release
Meg Bode
(516) 869-6610

May 7, 2009


WASHINGTON, DC – In testimony before the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises hearing, “Perspectives on Hedge Fund Registration,” Managed Funds Association (MFA) today announced its support for mandatory registration with the Securities and Exchange Commission (SEC), of investment advisers, including advisers to private pools of capital under the Investment Advisers Act of 1940.

Richard H. Baker, MFA President and CEO, said, “Though hedge funds were not the cause of the ongoing problems in our financial markets and our economy, MFA and our members share the commitment of policy makers to enact measures that will help restore stability to our markets, strengthen financial institutions and restore investor confidence. We believe supporting mandatory registration for investment advisers is just one of the many important steps that can be taken towards these mutually shared goals.

Baker noted, “This proposed framework goes beyond that recently called for by Treasury Secretary Geithner. The Administration’s proposal called for only the largest fund advisers to be registered for the purpose of assessing their systemic relevance. The registration regime we are supporting today, which has been driven largely by changes in markets and the growing demands of investors, is more comprehensive and will subject the vast majority of investment advisers, including the largest and those considered most systemically relevant, to the SEC’s registration requirements.

Baker’s testimony stressed that while hedge funds are important to the capital markets and the financial system, the relatively small size and scope of the industry, with approximately $1.5 trillion in assets under management, did not pose significant systemic risk. He also stressed that hedge funds are substantially less leveraged than banks, have outperformed the overall market and have not sought any federal assistance.

Baker indicated that to fulfill these additional responsibilities, without diminishing the agency’s ability to meet its core mission of investor protection, the SEC would need additional resources specifically for personnel, technology and training and recruitment.

“A registration framework that overwhelms the resources, technology and capabilities of regulators will not achieve the intended objective, and will greatly impair the ability of the regulator to fulfill their existing responsibilities, as well as their new responsibilities.”

In addition to supporting registration, MFA’s written testimony outlined several key principles that they believe Congress, the Administration and other policy makers should consider as they discuss changes to the financial regulatory system.

A copy of MFA’s written testimony is available at www.managedfunds.org.

About Managed Funds Association

MFA is the voice of the global alternative investment industry. Its members are professionals in hedge funds, funds of funds and managed futures funds, as well as industry service providers. Established in 1991, MFA is the primary source of information for policy makers and the media and the leading advocate for sound business practices and industry growth. MFA members include the vast majority of the largest hedge fund groups in the world who manage a substantial portion of the approximately $1.5 trillion invested in absolute return strategies. MFA is headquartered in Washington, D.C., with an office in New York. For more information, please visit: www.managedfunds.org.

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Hedge Fund Registration Becoming More Likely

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 Funds, Congress and Madoff

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

Paulson to Hedge Funds: Time for Hedge Fund Registration

Treasury Secretary Paulson spoke today about new financial market regulations.  In his remarks he mentioned that there should be some new hedge fund regulations which allow oversight by a market regulator. I have posted an excerpt containing the comment as well as the whole speech. Continue reading

Hedge Fund Law – Summary of Hedge Fund Laws and Regulations

he following is a summary of the major laws which affect the hedge fund industry.  If you have any questions on how these laws impact hedge funds in general or your specific situation, please contact us.


Securities Act of 1933 – the 1933 Act was enacted on May 27, 1933 as a reaction to the market crash of 1929. The overarching purpose of the act was to require that all “securities” be registered with the government (at the time the FTC). The Act provides some exemptions from this general requirement; for hedge fund managers, the most important exemption from registration is found in Section 4(2) which provides that securities will not need to be registered is they are sold in a transaction which does not involving any public offering. Continue reading

New Hedge Fund Regulations – Earlier Comments by Commissioner Atkins

As I was reading the book “Fooling some of the People all of the Time” by hedge fund manager David Einhorn, I read a passage discussing a prior speach by SEC Commissioner Atkins.  The passage was:

We need to stop scaring ourselves and others with rhetoric about hedge funds. Rather than talking about how hedge funds “operate in the shadows,” let us take a look at the regulatory constraints on hedge fund advisors that stop them from saying anything about their funds publicly. One irony of the SEC’s complaints about the secretive nature of the hedge fund industry is that advertising restrictions on hedge funds have been interpreted broadly so that hedge fund advisors do not dare to say anything publicly. Continue reading