OLD Media Moves

SEC regulation of hedge funds begins Wednesday

January 29, 2006

On Wednesday, Feb. 1, the Securities and Exchange Commission will begin regulating hedge funds, those formerly secretive investment vehicles in which the rich and college endowments have used to manage their money. It’s on that date that hedge funds have to register with the SEC. Many already have.

Here is part of a Sunday Associated Press article about the move: “Under the SEC rule, most hedge fund managers now must register with the agency. That opens the funds’ books to SEC examiners and makes them subject to an array of regulations including accounting and disclosure requirements. The examiners will be able to conduct inspection ‘sweeps’ of hedge funds.

“Thousands of hedge fund managers have already voluntarily registered. But some big hedge funds are using an exemption to avoid having to register — though SEC officials say it’s not a loophole; they call it ‘an element in the definition of ‘private fund’ that is designed to distinguish between hedge funds and other types of funds.'”

The Financial Times also covered the pending new regulations, noting, “SEC officials say the UK and Hong Kong are the most significant overseas jurisdictions for hedge fund managers. By the end of last Thursday, 113 hedge fund managers based outside the US were registered with the SEC. Of these, 68 are in the UK and seven are in Hong Kong.”

The disclosure requirements for hedge funds is what most business journalists are looking forward to. That means that hedge funds will be disclosing their financial performance and holdings on a regular basis to the SEC, just like mutual funds.

If you plan on covering hedge funds and this change, here are some places to look for information:

1. The SEC has a portion of its Web site devoted to hedge funds called Hedging your Bets.

2. The SEC rules for hedge funds can be found here.

3. A 134-page report issued by SEC staff in September 2003 called “Implcations of the Growth of Hedge Funds.”

4. The home page of the Hedge Fund Association. The press release section has information on the performance of the industry.

5. The Hedge Fund Center has some nice features such as a headlines section.

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