SEC Welcomes Public Comments On Hedge Fund Regulation

by Phillip Morton, Investors Offshore.com

05 June 2003

The United States SEC (Securities and Exchange Commission) has set a deadline of July 7 for members of the public to volunteer comments on how regulation of the burgeoning hedge fund industry can be improved.

The SEC has spent around a year investigating the practices of the largely unregulated multi-billion dollar hedge fund industry, which culminated in a two-day conference between SEC officials, prominent players in the world of fund management from both hedge and mutual funds, lawyers and accounting experts last month.

In a recent statement, SEC Chairman William Donaldson gave no clues as to the Commission's intentions regarding future regulation. "It is essential that the commission have the benefit of all relevant information," Donaldson merely observed.

One of the main concerns expressed by the SEC prior to last month's two day forum was regarding the increasing 'retailisation' of the hedge fund industry. Traditionally, hedge funds were only open for those with a net worth of $1 million to invest in. However, there has been an increasing tendency for funds to target more middle class investors, and in some cases minimum investment requirements have dropped to $25,000. Also, mutual funds have begun to increase their involvement in the hedge fund market by offering funds of funds which track a basket of hedge funds, and allow the more average investor to profit from their typically higher returns.

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