New York (HedgeCo.net) - A new act passed by the Senate and House of Representatives is expected to be signed into law by President Obama within days. The Jumpstart Our Business Startups, known as The Jobs Act, will eliminate a longstanding ban on general solicitation and advertising by hedge funds.
Hedge Fund Review Magazine reports that US hedge funds will, for the first time, be able to solicit investors freely and advertise their funds through mass media channels, from television adverts to newspapers articles and websites.
“This is obviously a monumental development in the industry, lifting the general solicitation ban for hedge funds.” Evan Rapoport, founder of industry portal HedgeCo.net, said. “It’s easy to imagine a world where the largest hedge funds are purchasing spots on CNBC. The industry has operated since the days of Alfred Winslow Jones under the basis of no general advertising, but I think we are moving closer to a point where hedge funds themselves will resemble the mutual fund industry. We already see transparency mandates causing funds to report holdings, the proliferation of UCITS funds with daily liquidity, and now general solicitations move us one step closer to the inevitable.”
The act is important to hedge funds as it tells the SEC to remove the prohibition on “general solicitation of general advertising” on offerings or sales of private funds and securities made under Regulation D of the Securities Act of 1933.
The Managed Funds Association (MFA), says the new rules will “modernise existing securities laws in a manner that will enhance financial market transparency and investor protection”.
However, regulators have started to raise concerns about the rule change, commissioner Luis Aguilar said the legislation would be “a boon for boiler-room operators, Ponzi schemers, bucket shops and garden-variety fraudsters by enabling them to cast a wider net and making securities law enforcement much more difficult”.
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