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Rating:It's Hedge and Private Equity vs. Mutual Funds In the Fighting Ring Not Rated 0.0 Email Routing List Email & Route  Print Print
Friday, June 01, 2012

It's Hedge and Private Equity vs. Mutual Funds In the Fighting Ring

News summary by MFWire's editors

Thanks to the JOBS Act (Jumpstart Our Business Startups Act) passed on April 5 hedge funds and private equity funds will soon be able to advertise to the public. The law is intended to encourage funding of small businesses by easing securities regulations.

Yet, the mutual fund industry is not happy with the act, reports Jessica Holzer for Dow Jones.

In a letter to the SEC last week, ICI President and CEO Paul Schott Stevens urged the SEC to subject private funds to equally or more strict regulations than those govern the heavily regulated advertisements by mutual funds. He also called for the SEC to raise the income and net worth thresholds for investors to be considered accredited.

"Private fund advertising is particularly susceptible to fraud," he argued, saying that private funds "often pursue investment strategies that are opaque" or "invest in securities that are difficult to value or relatively illiquid."

Meanwhile BlackRock vice chairman Barbara Novick and the Managed Funds Association, which represents the largest hedge funds, have each written separate letters arguing that retail fund advertisements aren't needed for private funds, since they only sell shares to institutions and wealthy investors.

"BlackRock does not believe that any additional regulatory framework for private fund advertising is necessary for the protection of investors," Novick wrote.

A spokesman for Schapiro declined to offer her opinion on private fund advertising.

"Staff will thoughtfully consider all of the issues raised in public comments as it formulates a rulemaking recommendation," the spokesman said.

Congress gave SEC Chairman Mary Schapiro 90 days from the enactment of the JOBS Act to write the rules for advertising for private offerings.

You can read all comments about this issue -- including Stevens' full letter -- here

Edited by: Irene Park

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