Tag Archives: small hedge fund

GSEC to Stop Clearing for Small Hedge Funds

According to a recent Bloomberg article, and a couple of my recent clients, Goldman Sachs Execution and Clearing (GSEC) will no longer act as the custodian and clearing agent for most small hedge funds with less than $5 million in AUM.  As a quick background, smaller funds which do not have the minimum asset size or strategy to establish a direct relationship a major prime broker will generally establish an account with a mini-prime broker.  The mini-prime broker will act as the relationship manager and will interface with the fund manager while the fund assets will be custodialized at the major prime broker.

This move will only affect the very small fund launches and will limit the mini-primes that small funds can use as some mini-primes only execute through GSEC.  Current funds utilizing GSEC are not likely to be affected, but those funds which are just now establishing their accounts with GSEC should discuss this issue with their contact at the mini-prime.


Bart Mallon, Esq. runs the hedge fund law blog and provides registration and compliance services to hedge fund managers through Cole-Frieman & Mallon LLP, a hedge fund law firm.  He can be reached directly at 415-868-5345.

New Hedge Fund Regulation: Guidance From Former SEC Commissioner Should be Followed

In the conversations the hedge fund community will be having with Congress and the regulators in the coming months regarding increased regulation, we should look to shared answers to the issues which need to be addressed.  In this vein, I have been researching the speeches of prominent SEC personel.  I have just recently reviewed a speech by former Commissioner Paul Atkins regarding regulations and how regulations impact the investment management community.  Perhaps surprising to some, the former Commissioner showed reasonably thinking with regard to increased regulation.

The speech, reprinted in its entirety below, was given in the wake of the proposed adoption of two rule changes back in December of 2006.  The first proposed rule change was to amend the Investment Advisers Act so that it was clear that hedge fund managers had an anti-fraud duty to the investors in their hedge funds as well as the hedge funds themselves.  The second proposed rule was the “accredited natural person” rule which would effectively change the potential make up of hedge funds by requiring a different net worth threshold for investors in hedge funds.  There were a significant amount of comments to the proposed rules which stated that it would be a bad idea to raise the net worth requirements for hedge fund investors.  Neither of the proposed rules have been adopted and it is unlikely that they will be, at least in the near future.  Continue reading