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Washington, DC – November 9, 2009 – The Hedge Fund Association, HFA, today announced progress on its “Speak Up” campaign, which seeks to ensure that regulation of the hedge fund industry meets government concerns without imposing over-reaching, broad measures that makes it costly for small funds to operate, and could impede industry growth and job creation.
HFA President, David Friedland, said that the HFA was not opposed to additional regulation and registration or reporting requirements. ”The HFA is open to working with Congress to ensure that any regulation is cost effective and achieves objectives that both Congress and the industry need.” Mr. Friedland further noted that all hedge funds are already subject to certain rules and regulations, including SEC anti-fraud provisions.
Mr. Friedland said, however, that “proposals from Congress to regulate funds with assets under management of over $30 million could result in smaller hedge funds, which form the vast majority of firms, to close their doors, causing a devastating impact on an industry already suffering from the effects of the financial downturn. This will result in a loss of jobs not only within those hedge fund firms, but also at the administrators, law firms, auditors, banks and brokers who rely so heavily on smaller/startup funds for much of their business.”
The Hedge Fund Association’s “Speak Up” campaign was launched with the aim of educating lawmakers and the media of the burden that new regulations would place on smaller hedge funds. ”Some form of registration requirement and reporting requirement for firms with more than $250 million would seem to make the most sense” Mr. Friedland stated. ”Typically firms with more than $250 million have a much larger internal staff than firms managing smaller funds. The larger firms can take on the burden of increased registration/reporting requirements and an internal compliance officer in a much more economical fashion.”
As a result of this campaign, recent legislation being proposed by Congress would raise the registration requirement from assets under management of $30 million to $150 million.
“It’s not as high as we would like, but we appreciate that lawmakers have listened to the concerns of the HFA and taken steps that would protect the small managers from the burden of excessive regulation.”
About The Hedge Fund Association
The Hedge Fund Association (“HFA”) is an international not-for-profit organization made up of hedge funds (both large and small), hedge fund investors (including funds of funds, family offices and high net worth individuals) and service providers (including law firms, administrators, brokers, accountants, marketers and technology firms). Unlike other trade organizations in the industry, our membership is not made up exclusively of the largest funds in the industry. We hold frequent educational and networking events, and focus on educating the public, media and lawmakers to dispel myths about the hedge fund industry. For more information please visit www.thehfa.org.
HedgeCo.Net – November 9, 2009 – The Hedge Fund Association, HFA, today announced progress on its “Speak Up” campaign, which seeks to ensure that regulation of the hedge fund industry meets government concerns without imposing over-reaching, broad measures that makes it costly for small funds to operate, and could impede industry growth and job creation.
HFA President, David Friedland, said that the HFA was not opposed to additional regulation and registration or reporting requirements. ”The HFA is open to working with Congress to ensure that any regulation is cost effective and achieves objectives that both Congress and the industry need.” Mr. Friedland further noted that all hedge funds are already subject to certain rules and regulations, including SEC anti-fraud provisions.
Mr. Friedland said, however, that “proposals from Congress to regulate funds with assets under management of over $30 million could result in smaller hedge funds, which form the vast majority of firms, to close their doors, causing a devastating impact on an industry already suffering from the effects of the financial downturn. This will result in a loss of jobs not only within those hedge fund firms, but also at the administrators, law firms, auditors, banks and brokers who rely so heavily on smaller/startup funds for much of their business.”
The Hedge Fund Association’s “Speak Up” campaign was launched with the aim of educating lawmakers and the media of the burden that new regulations would place on smaller hedge funds. ”Some form of registration requirement and reporting requirement for firms with more than $250 million would seem to make the most sense” Mr. Friedland stated. ”Typically firms with more than $250 million have a much larger internal staff than firms managing smaller funds. The larger firms can take on the burden of increased registration/reporting requirements and an internal compliance officer in a much more economical fashion.”
As a result of this campaign, recent legislation being proposed by Congress would raise the registration requirement from assets under management of $30 million to $150 million.
“It’s not as high as we would like, but we appreciate that lawmakers have listened to the concerns of the HFA and taken steps that would protect the small managers from the burden of excessive regulation.”
About The Hedge Fund Association
The Hedge Fund Association (“HFA”) is an international not-for-profit organization made up of hedge funds (both large and small), hedge fund investors (including funds of funds, family offices and high net worth individuals) and service providers (including law firms, administrators, brokers, accountants, marketers and technology firms). Unlike other trade organizations in the industry, our membership is not made up exclusively of the largest funds in the industry. We hold frequent educational and networking events, and focus on educating the public, media and lawmakers to dispel myths about the hedge fund industry. For more information please visit www.thehfa.org.
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
Professional Pensions – The Universities Superannuation Scheme has appointed UBS Global Asset Management – Fund Services to deliver hedge fund of funds administration services.
The country’s second largest pension fund said it had enhanced its in-house hedge fund selection capability in recent months, by implementing an absolute return strategies programme.
Seeking Alpha – Very in-depth and analytical commentary out of Elliott Management in their recent second quarter 2009 letter to investors. The hedge fund has penned a 24 page letter covering topics of risk management, the automotive industry, regulation, distressed assets, arbitrage opportunities and much, much more. We highly recommend taking the time to peruse through this lengthy and informative hedge fund investor letter.
Elliott Management was founded by Paul Singer back in 1977 and managers over $12 billion today.
Bloomberg – Pinpoint Investment Advisor Ltd., a hedge fund manager of $560 million, returned as much as four times its Asian peers this year through July with profits from a rebound in Chinese stocks and debt securities.
The $70 million Pinpoint Opportunities Fund, which gained 85 percent in the period, invested about half its assets in convertible and high-yield bonds, including those of Chinese property developers, said Duanmu Yongshan, Pinpoint’s Hong Kong- based chief marketing officer. The $300 million Pinpoint China Fund returned nearly 51 percent in the period, he said.
Riverside Press Enterprise – The founder and manager of two Beverly Hills hedge funds has pleaded guilty to federal fraud charges.
Bradley Ruderman pleaded guilty Monday to two counts of wire fraud, two counts of investment adviser fraud and a misdemeanor count of failing to file income taxes in 2007.
Prosecutors say Ruderman admitted to cheating investors, many of them family members, out of $25 million by promising annual returns as high as 60 percent and sending fake account statements.
West Palm Beach (HedgeCo.net) – On the 18 of March, the Australian Hedge Fund & Research team at Bronte Capital began dropping hints regarding an un-named $60 million dollar Ponzi Scheme. In a blog entry named "Curiouser and Curiouser" Bronte Capital described the fraud and to support support their claims, posted 2 pieces of Ponta Negra marketing material on the ScribD document sharing site.
The following day, Lawyers representing Ponta Negra contacted John Hempton of Bronte Capital and threatened them with legal action if they did not immediately take down the blog entry. Under the threat of legal action Bronte Capital removed the post.
Unbeknownst to Bronte Capital, the SEC was also investigating the Ponta Negra funds and on the 27th of April the SEC annouced that they were freezing the assets of the 2 Hedge Funds stating that, according to the complaint "on at least two occasions, Francesco Rusciano, 27, of Ponta Negra Group LLC forged brokerage account statements to make it appear that a hedge fund account had millions more dollars in assets than it had."
The SEC announcement restarted the discussion a the Bronte Capital blog and as of the 1st of May, four detailed blog entries have been posted.
The blog entries detail the connections and often blurry lines between Paradigm, owned by the Biden family and the Ponta Negra funds. The common link at the heart of the controversy is Jeffry Schneider and his team at Onyx Captial who worked as hedge fund marketers for both funds. Jeffry Schneider was linked earlier in the year to Stanford Capital Management who is under investigation by the SEC alegedly for running a ponzi scheme. Jeffry Schneider, Onyx Capital and Ponta Negra subleased office space (and infrastructure) from Paradigm.
For a detailed summary read FT Alphaville’s story titled "Untangling floor 17, 650 5th Avenue". Ongoing details of the case are posted at Bronte Capital’s blog.
As detailed on the Bronte Capital blog, Jeffry Schneider had a brief relationship with HedgeCo Networks which ended in a material breach of contract by Jeffry Schneider and ongoing legal action by HedgeCo Networks against Jeffry Schneider and Onyx Capital. Ponta Negra submitted its fund to the HedgeCo.Net database, but was denied due to concerns by the HedgeCo.Net review board.
Aaron Wormus
News Contributor to HedgeCo.Net Email: aaron@hedgeco.net
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