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SEC chair comments on hedge funds transparency

  • Speech — gray Image

Oct 18, 2013

At the Managed Funds Association Outlook 2013 Conference held October 17–18 in New York, SEC Chair Mary Jo White spoke on the new era of transparency and openness in the private and hedge funds industry.

Ms. White opened her speech with a discussion of what has caused the substantial shift to transparency in the hedge funds industry — the Dodd-Frank Act and the JOBS Act. These regulations promote transparency and openness in different but complimentary ways. She mentioned that the registration rule, mandated by the Dodd-Frank Act, has greatly increased the visibility of the industry. Before the rule, hedge funds and other private advisers voluntarily registered with the SEC. By mandating registration, existing and prospective investors will have access on the SEC’s Web site to specific information on the operations and funds managed.

Next, Ms. White explained a recent proposed rule that would require information about offerings conducted under Rule 506 of Regulation D. The proposed rule promotes transparency by enabling the SEC to better monitor the private placement market, which will allow the SEC to learn more about market size, who conducts offerings, and what causes an unsuccessful offer completion.

In addition, Ms. White noted that registering with the SEC will require compliance with business conduct rules that help protect investors and safeguard the markets. One of the processes the SEC conducts to make sure registrants are in compliance is by sending a team of professional examiners to review records and evaluate a firm. The following are some of the areas the examiners focus on:

  • Marketing.
  • Portfolio management.
  • Conflicts of interest.
  • Safety of client assets.
  • Valuation.

Lastly, Ms. White commented on the SEC’s responsibilities to ensure that the rules put in place are working as intended and to create an enforcement program that is focused and direct.

The full text of the speech is available on the SEC's Web site.

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