The SEC registration requirement for hedge funds is stopping US investors getting involved in intern...
The SEC registration requirement for hedge funds is stopping US investors getting involved in international capital, according to SEC Commissioner Cynthia Glassman.
She said the registration requirement for hedge fund advisers, which she had voted against, was not well thought out.
Glassman said: "Had we approached the hedge fund issue more analytically at the outset, deciding what information we really needed and how best to get it, I believe we would be in a much better position today to provide effective monitoring and to see red flags. We should have considered alternatives such as raising the financial criteria for eligible investors.
"Advisers to funds with fewer than 15 underlying US investors do not have to register. Nor do advisers to funds with lock-ups of more than two years, or advisers whose funds are closed to new investors.
"The unintended but predictable outcome of this," she explained, "is that global funds are excluding US investors and that US domestic funds are lengthening their lock-up periods or closing their funds."
This, she added, inhibited US investors from participating in the global capital markets and at the same time, the SEC spoke of capital markets becoming more internationalised.
Former SEC lawyer Mark Berman also expressed reservations as to whether registration would be efficient in its primary objective - to eradicate fraud or to make it a harder environment for fraudsters to operate in.
He said: "Over a period of time the SEC staff, with assistance from other regulators will review the non-US effects of this new rule and its impact on non-US advisers and if warranted, should take steps to address deficiencies or issues."
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