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There are currently several proposals on the floor of Congress that would affect the future of hedge fund regulatory requirements. The proposals call for increased transparency and accountability of hedge funds in a governmental mission to minimize systemic risk. The following proposals are currently being considered:
•Consumer Financial Protection Agency Act of 2009
•Private Fund Transparency Act of 2009
•Hedge Fund Advisor’s Registration Act
•Private Fund Investment Advisers Registration Act of 2009
•Hedge Fund Transparency Act of 2009
All of the aforementioned proposals would eliminate the private advisor exemption that currently excludes hedge funds under 15 clients from having to register with the SEC. Though it’s uncertain which of the proposals will pass, it is apparent that hedge funds can expect registration and development of a compliance program to be a requirement in their near futures – likely to pass by the end of the year with a 6 month implementation schedule.
By eliminating the hedge fund registration exemption, all of these bills would require hedge funds to register with the SEC, have compliance policies and procedures and a code of ethics, develop business continuity plans, and implement an anti-money laundering program. What’s more, as SEC regulated firms, Hedge Funds can also expect to be subject to an annual audit by FINRA or another examination body that will be examining the compliance program with increased scrutiny to avoid another messy scandal.
To this point, Rick Nummi a former senior attorney at the SEC who helped to write the Hedge Fund Examination module and currently serves as an Executive Consultant at Accounting & Compliance International suggests that regulations and examinations are just going to get more focused. Nummi says “FINRA Management will have “game changing” directives to their exam staff to avoid another Madoff/Stanford/Bluestein. The primary driver will be/currently is, ‘If you (the FINRA Exam Staff) don’t find it (while you are onboard a firm examining) and it happens (another embarrassing fraudster) on my (Senior FINRA Staff) watch, you (the examiner) will be castrated (fired)’. It doesn’t matter what the priorities are, there will be no quarter given to lax compliance staff.”
To cope with the looming registration requirement, it is advisable to register your hedge fund sooner rather than later and to appoint your firm’s Chief-Compliance Officer before these experience compliance professionals become a precious and expensive commodity. Compliance firm’s such as Nummi’s Accounting & Compliance International can spearhead the registration process for your firm and develop a customized compliance manual to help you create a strong compliance infrastructure.
If you’re not ready to register, you should run your firm as if you are registered and follow compliance best practices for Investment Advisors (under SEC Rule 206), which include appointment of a CCO, development of a compliance manual, and an annual review of your program. A strong compliance infrastructure will inspire investor confidence and benefit your firm.
You should also be sure to maintain for review accurate books and records that might be required for inspection. For a comprehensive list of documentation that your firm should keep on file review Books and Records to be maintained by Hedge Funds.
The regulatory landscape is changing for Hedge Funds and keeping up with those changes is imperative for your firm to remain competitive, compliance, and successful.
If you would like to inquire into Hedge Fund Registration or Compliance for your firm, contact Accounting & Compliance International (ACI) and request a complimentary consultation with one of our representatives: Email: info@acisecure.com or Phone: 212-668-8700. Website: www.acisecure.com.
There are currently several proposals on the floor of Congress that would affect the future of hedge fund regulatory requirements. The proposals call for increased transparency and accountability of hedge funds in a governmental mission to minimize systemic risk. The following proposals are currently being considered:
Consumer Financial Protection Agency Act of 2009
Private Fund Transparency Act of 2009
Hedge Fund Advisor’s Registration Act
Private Fund Investment Advisers Registration Act of 2009
Hedge Fund Transparency Act of 2009
All of the aforementioned proposals would eliminate the private advisor exemption that currently excludes hedge funds under 15 clients from having to register with the SEC. Though it’s uncertain which of the proposals will pass, it is apparent that hedge funds can expect registration and development of a compliance program to be a requirement in their near futures – likely to pass by the end of the year with a 6 month implementation schedule. By eliminating the hedge fund registration exemption, all of these bills would require hedge funds to register with the SEC, have compliance policies and procedures and a code of ethics, develop business continuity plans, and implement an anti-money laundering program. What’s more, as SEC regulated firms, Hedge Funds can also expect to be subject to an annual audit by FINRA or another examination body that will be examining the compliance program with increased scrutiny to avoid another messy scandal. To this point, Rick Nummi a former senior attorney at the SEC who helped to write the Hedge Fund Examination module and currently serves as an Executive Consultant at Accounting & Compliance International suggests that regulations and examinations are just going to get more focused. Nummi says “FINRA Management will have “game changing” directives to their exam staff to avoid another Madoff/Stanford/Bluestein. The primary driver will be/currently is, ‘If you (the FINRA Exam Staff) don’t find it (while you are onboard a firm examining) and it happens (another embarrassing fraudster) on my (Senior FINRA Staff) watch, you (the examiner) will be castrated (fired)’. It doesn’t matter what the priorities are, there will be no quarter given to lax compliance staff.” To cope with the looming registration requirement, it is advisable to register your hedge fund sooner rather than later and to appoint your firm’s Chief-Compliance Officer before these experience compliance professionals become a precious and expensive commodity. Compliance firm’s such as Nummi’s Accounting & Compliance International can spearhead the registration process for your firm and develop a customized compliance manual to help you create a strong compliance infrastructure. If you’re not ready to register, you should run your firm as if you are registered and follow compliance best practices for Investment Advisors (under SEC Rule 206), which include appointment of a CCO, development of a compliance manual, and an annual review of your program. A strong compliance infrastructure will inspire investor confidence and benefit your firm. You should also be sure to maintain for review accurate books and records that might be required for inspection. For a comprehensive list of documentation that your firm should keep on file review Books and Records to be maintained by Hedge Funds. The regulatory landscape is changing for Hedge Funds and keeping up with those changes is imperative for your firm to remain competitive, compliance, and successful. If you would like to inquire into Hedge Fund Registration or Compliance for your firm, contact Accounting & Compliance International (ACI) and request a complimentary consultation with one of our representatives: Email: info@acisecure.com or Phone: 212-668-8700. Website: www.acisecure.com. – hedgeco.net
Bloomberg – Former Bear Stearns Cos. hedge fund manager Ralph Cioffi, indicted for an alleged fraud that helped bring down the securities firm, attempted to use his $2 million redemption from a fund he supervised as collateral for a condominium, U.S. prosecutors said.
Cioffi, 53, also ”rarely” heeded compliance trading measures, the government said in a court filing in Brooklyn, New York, federal court. Cioffi and another former Bear Stearns hedge fund manager, Matthew Tannin, 47, were indicted last year for misleading investors about the health of two hedge funds that failed in July 2007, costing investors $1.6 billion. The implosion helped trigger the credit crunch and the eventual sale of Bear Stearns to JPMorgan Chase & Co.
Forbes – A year ago, Conrad Levy was a player in one of the most spectacular blow-ups in hedge fund history. Peloton Partners, the fund at which Levy was chief compliance and operating officer, collapsed after an outsized bet on subprime securities went horribly wrong, resulting in the fund losing $17 billion in a matter of days. Now Levy is profiting from that experience.
Since mid January, Levy has been working as a consultant for PricewaterhouseCoopers, helping hedge funds restructure themselves when they have hit a landmine.
Bloomberg – Camulos Capital LP, a hedge-fund firm founded by former Soros Fund Management LLC trader Richard Brennan, is in talks to have Mariner Investment Group run its business operations.
Mariner, an $11 billion firm managed by Bill Michaelcheck, may handle compliance, accounting and administration for Stamford, Connecticut-based Camulos, according to a June 30 investor letter obtained by Bloomberg News.
Caymen Net News – Hedge fund managers from across the world are expected to convene in the Cayman Islands for GAIM Ops, a forum that will be held 26-29 April at the Ritz Carlton Resort. GAIM Ops Cayman is the largest hedge fund operational due diligence, compliance, and risk management forum internationally. Industry professionals including Operational Due diligence, COOs, CFOs, CCOs, and general counsel for hedge funds will come to discuss issues affecting the industry.
More than 500 senior delegates are expected to attend the conference, reportedly to tackle issues such as risks that may still be prevalent in the market, and the possible positive outcomes for practioners of operational due diligence.
Auburn Journal – Placer County is pumping money into a North Auburn sewer treatment plant upgrade while seeking federal funding for a pricey regional wastewater pipeline from North Auburn to Lincoln.
No decision has been made to commit to either the $133 million Lincoln tie-in or the $88.5 million Joeger Road plant upgrade.
But Jim Durfee, county facility services director, told supervisors at Tuesday’s board meeting that moving ahead on a no-bid contract with design firm Owen Psomas would signal to water-quality officials that efforts were continuing to move the North Auburn plant into compliance with new standards.
Reuters – Hedge funds are keeping borrowings and risk low and seeking sanctuary in safe-haven assets during the current market turbulence, but some are beginning to see opportunities to make attractive investments.
The events of the past few days — the collapse of Lehman Brothers, the $50 billion (28 billion pounds) sale of Merrill Lynch to Bank of America and the $85 billion rescue of AIG — have hit funds’ returns and caused many to cut back their bets.
"Managers have been reining in leverage given the extreme volatility in the market. Sentiment is so bad, people are loath to make big bets," said Jack McDonald, chief executive of hedge fund service provider Conifer Securities.
Eclectica Asset Management, co-founded by high-profile hedge fund manager Hugh Hendry, told Reuters its hedge fund had 140 percent of net asset value invested in mid- and long-dated German bunds.
The remainder of its exposure is to bond yield swaps and soft commodities.
