This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here.  
  • Delicious




SEC May Increase Monitoring Of US Hedge Funds

by Carla Johnson, Investors Offshore, London

15 May 2002

Paul F. Roye, director of the Securities and Exchange Commission's division of investment management, said at an investment conference yesterday in New York that the SEC has been stepping up its efforts to crack down on hedge-fund fraud, but would not comment on plans to increase regulation of the industry.

Mr Roye told delegates at the Investment Management Institute seminar that there had been 150 SEC enforcement actions against hedge funds over the past five years, many of them dealing with out and out fraud such as misappropriation of investor's funds. "It's an area of concern. When we see situations like this, you can expect the commission to be very aggressive," Roye said.

Hedge funds are exempt from registering with the SEC under the Investment Advisers Act as long as they sell only to fewer than 50 investors, but Roye emphasized that the funds are still subject to anti-fraud regulations. Some hedge funds have registered in order to enlarge their investor pools, and there have been suggestions that the SEC wants to change the regulations to force all hedge funds to register.

Roye said the commission is increasing its enforcement of anti-fraud rules in several areas and in particular is looking at hedge funds that are managed by registered investment advisers and funds that are themselves registered with the SEC. He said the commission is examining how advisers that offer both hedge funds and separate accounts handle potential conflicts of interest in the allocation of initial public offerings to the different accounts.

The SEC is concerned that the risks of the underlying investments in funds of funds and multi-manager funds are adequately disclosed in a fund's prospectus, said the official, particularly as these funds are being marketed to smaller investors. The commission also wants to ensure that the managers have procedures in place to monitor the valuations of illiquid investments in the underlying hedge funds.

.

 

 






Write a comment