Court tosses out SEC hedge fund rule
Well, this is interesting, SEC got sent back to the drawing board. They ofcourse will rebound, when , I dunno. But they will. Basically means that the SEC cant touch and surfs (hedgefunds as they can be classified) unless they have over $30 Million dollars. Surfs dont need to register with SEC until they get to that point. So just another a small step in legitimizing this industry. Dont get me wrong, if a surf is a ponzi it is illegal. Read this article:
http://news.yahoo.com/s/nm/20060623/bs_nm/financial_funds_court_dc_2
By John Poirier and Joel Rothstein Fri Jun 23, 6:05 PM ET
WASHINGTON (Reuters) - In a major setback to the U.S.
Securities and Exchange Commission's efforts to regulate the $1.3 trillion hedge fund industry, a federal appeals court on Friday tossed out a rule requiring the investment pools to register with the agency.
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The SEC rule, which went into effect in February, was a key first step in regulating an industry, which saw its assets double in the past five years as pension funds, endowments and charities poured in billions of dollars to boost their investment returns.
The court decision raises questions about how aggressively the SEC will seek to regulate the industry. The hedge fund rule was narrowly adopted on a 3-2 vote under SEC Chairman Christopher Cox's predecessor, William Donaldson.
Cox said he directed SEC staff to evaluate the court decision and draft a "set of alternatives" on how the agency should approach the hedge fund industry. "The court's finding ... requires that going forward we reevaluate the agency's approach to hedge fund activity," he said.
But speaking in Washington on Thursday, Cox questioned whether the SEC currently has the ability to register and monitor the fast-growing hedge fund industry, citing a demand on resources.
"If we did that, we'd have to stop doing something else," he told reporters at a conference.
The court ruling opens the door for advisers in the loosely regulated industry to withdraw their SEC registration.
As of Friday, there were 2,533 investment advisers registered with the SEC who managed 13,876 hedge funds with assets totaling $2.4 trillion. Advisers often manage several funds.
"So the court is really sending the SEC back to the drawing board on this, with such fundamental questions raised that I tend to doubt the SEC will even try to redraw the rule," said Peter Blume, a lawyer who specialises in corporate compliance issues.
The rule adopted by the SEC required most U.S. hedge funds with more than $30 million in assets and 15 or more clients to register with the agency. Registration meant submitting to periodic audits, keeping better records and following new procedures aimed at discouraging would-be cheaters.
In a victory for the hedge funds, the U.S. Court of Appeals for the District of Columbia declared the rule arbitrary because it exempted funds with fewer than 15 clients.
"The number of investors in a hedge fund -- the 'clients' according to the commission's rule -- reveals nothing about the scale or scope of the fund's activities," the court said.
"It is the volume of assets under management or the extent of indebtedness of a hedge fund or other such financial metrics that determines a fund's importance to national markets."
The decision was cheered by hedge fund managers.
"It looks like a pretty complete victory," said Phillip Goldstein, who filed the lawsuit challenging the SEC and manages the $220-million New York-based hedge fund group Bull Dog Investors. "The fundamental argument is the SEC does not have the authority to adopt this rule."
Some experts said the ruling might spur the SEC to expand its scope of jurisdiction.
"It's possible that the ruling will result in a review of the asset management business and revisions to the Advisors Act in a way that expands the SEC's mandate to include private equity funds," securities attorney David Goldstein said.
Business advocates said they hoped the decision would prompt the SEC to reconsider rules some view as unnecessary.
"I hope the SEC will start fresh and determine the problem it is trying to solve and then find the most surgical instruments it needs to do that," said
U.S. Chamber of Commerce Senior Vice President David Hirschmann.
Hirschmann said the SEC should first consider other oversight methods such as identifying particularly risky hedge fund activities, or raising the minimum net worth for investors to participate in hedge funds.
The court ruling came the same day the New York Times reported the SEC had investigated Pequot Capital, a $7 billion hedge fund, for possible insider trading. A senior SEC lawyer in the case claimed he was fired after he sought to subpoena a top Wall Street executive in the probe.
Pequot denied any wrongdoing.
http://news.yahoo.com/s/nm/20060623/bs_nm/financial_funds_court_dc_2
By John Poirier and Joel Rothstein Fri Jun 23, 6:05 PM ET
WASHINGTON (Reuters) - In a major setback to the U.S.
Securities and Exchange Commission's efforts to regulate the $1.3 trillion hedge fund industry, a federal appeals court on Friday tossed out a rule requiring the investment pools to register with the agency.
ADVERTISEMENT
The SEC rule, which went into effect in February, was a key first step in regulating an industry, which saw its assets double in the past five years as pension funds, endowments and charities poured in billions of dollars to boost their investment returns.
The court decision raises questions about how aggressively the SEC will seek to regulate the industry. The hedge fund rule was narrowly adopted on a 3-2 vote under SEC Chairman Christopher Cox's predecessor, William Donaldson.
Cox said he directed SEC staff to evaluate the court decision and draft a "set of alternatives" on how the agency should approach the hedge fund industry. "The court's finding ... requires that going forward we reevaluate the agency's approach to hedge fund activity," he said.
But speaking in Washington on Thursday, Cox questioned whether the SEC currently has the ability to register and monitor the fast-growing hedge fund industry, citing a demand on resources.
"If we did that, we'd have to stop doing something else," he told reporters at a conference.
The court ruling opens the door for advisers in the loosely regulated industry to withdraw their SEC registration.
As of Friday, there were 2,533 investment advisers registered with the SEC who managed 13,876 hedge funds with assets totaling $2.4 trillion. Advisers often manage several funds.
"So the court is really sending the SEC back to the drawing board on this, with such fundamental questions raised that I tend to doubt the SEC will even try to redraw the rule," said Peter Blume, a lawyer who specialises in corporate compliance issues.
The rule adopted by the SEC required most U.S. hedge funds with more than $30 million in assets and 15 or more clients to register with the agency. Registration meant submitting to periodic audits, keeping better records and following new procedures aimed at discouraging would-be cheaters.
In a victory for the hedge funds, the U.S. Court of Appeals for the District of Columbia declared the rule arbitrary because it exempted funds with fewer than 15 clients.
"The number of investors in a hedge fund -- the 'clients' according to the commission's rule -- reveals nothing about the scale or scope of the fund's activities," the court said.
"It is the volume of assets under management or the extent of indebtedness of a hedge fund or other such financial metrics that determines a fund's importance to national markets."
The decision was cheered by hedge fund managers.
"It looks like a pretty complete victory," said Phillip Goldstein, who filed the lawsuit challenging the SEC and manages the $220-million New York-based hedge fund group Bull Dog Investors. "The fundamental argument is the SEC does not have the authority to adopt this rule."
Some experts said the ruling might spur the SEC to expand its scope of jurisdiction.
"It's possible that the ruling will result in a review of the asset management business and revisions to the Advisors Act in a way that expands the SEC's mandate to include private equity funds," securities attorney David Goldstein said.
Business advocates said they hoped the decision would prompt the SEC to reconsider rules some view as unnecessary.
"I hope the SEC will start fresh and determine the problem it is trying to solve and then find the most surgical instruments it needs to do that," said
U.S. Chamber of Commerce Senior Vice President David Hirschmann.
Hirschmann said the SEC should first consider other oversight methods such as identifying particularly risky hedge fund activities, or raising the minimum net worth for investors to participate in hedge funds.
The court ruling came the same day the New York Times reported the SEC had investigated Pequot Capital, a $7 billion hedge fund, for possible insider trading. A senior SEC lawyer in the case claimed he was fired after he sought to subpoena a top Wall Street executive in the probe.
Pequot denied any wrongdoing.
posted by 4Newbies.com at 11:04 AM
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