Hedge Fund Intelligence New standards in Investor Transparency | Page 6

NEW STANDARDS IN INVESTOR TRANSPARENCY
CHINA 2012 OVERVIEW
both of which are explicit about requirements for enhanced transparency.
One of AIFMD’s stated aims is to “improve investor protection by imposing
new depositary standards and enhanced transparency through new investor
disclosure rules and mandatory reporting to competent authorities”.
In the US, meanwhile, regulatory pressure has also intensified since the
financial crisis and the Madoff fraud. The most significant regulatory change
in the US is the Dodd-Frank Act, described in a ‘cheat-sheet’ published by
the law firm, Morrison & Foerster, as “the most comprehensive financial
regulatory reform measure taken since the Great Depression”.
This requires advisors to hedge funds managing $100 million or more to register with the SEC. Dodd-Frank also directs the SEC to collect information
from private fund advisors regarding the risk profile of their funds.
Another key component of US regulatory change to have had an impact on
transparency in the hedge fund industry is the JOBS (Jumpstart our Business
Startups) Act, which lifted the decades-old ban on general solicitation that
applied to funds offering private securities under Rule 506 of Regulation D.
For the SEC itself, Dodd-Frank in particular turned out to be quite an eyeopener about how little the regulators knew about the sprawling US hedge
fund industry.
Mary Jo White, chairwoman of the SEC, acknowledged as much in a keynote
address to the Managed Funds Association (MFA) in October 2013. As recently as 2010, she explained, regulators’ view
>> As of September 23, 2013,
of the hedge fund market was limited to advihedge fund managers feel
sors who had voluntarily registered with the
SEC, or were required to do so because they
they have a new freedom to
communicate with the public, to also managed a mutual fund.
“We knew that there was a gap in our knowladvertise, to talk to reporters, to edge,” White explained. “But we did not know
speak at conferences and, most how many hedge fund managers existed and we
importantly, communicate with did not know who they were – we could not tell
investors openly and frankly >> how big this slice of the market really was.”
Dodd-Frank changed all that, with hedge
Mary Jo White, chairwoman
funds and other private fund advisors required
of the SEC
to show their hands for the first time. Prior to
6 Special Report June 2014

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