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Mutual Funds Push To Restrict Hedge Fund Ads

WASHINGTON (Dow Jones)–The mutual fund industry wants the Securities and Exchange Commission to impose restrictions on advertising by hedge funds and private equity funds now that such private funds will be allowed to engage in mass marketing.

Hedge funds will soon be able to advertise broadly to the public thanks to a measure in the recently-passed JOBS Act that directed the SEC to repeal a longstanding ban on publicizing private securities offerings.

The mutual fund industry’s main lobby group, the Investment Company Institute, is asking the SEC to subject hedge funds to the same or more-stringent restrictions that apply to advertisements by mutual funds, which are heavily regulated.

ICI President and CEO Paul Schott Stevens, in a letter to the SEC last week, said the limits are needed to protect investors. “Private fund advertising is particularly susceptible to fraud,” he wrote, because private funds “often pursue investment strategies that are opaque” or “invest in securities that are difficult to value or relatively illiquid.”

The hedge fund industry rejects the argument.

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