Four months have now passed since the deadline for all qualifying hedge fund advisers to register with the SEC. Although many remain unhappy with the situation, so far the more dire warnings about its impact have failed to materialize. But the lessons learned by market players and the SEC itself over the next few months will have a profound effect on both the industry and future regulation.
(This article appears courtesy of International Financial Law Review, to take a free trial click here)
In September 2003 New York attorney general Eliot Spitzer announced that, as part of a broader investigation into late trading, market timing and other activities in the mutual funds industry, his office had reached a $40 million settlement with a hedge fund, Canary Capital Partners, and its managers (who did not admit to wrong-doing). Settlements with several mutual funds would follow.
Although Spitzer was targeting mutual funds, inevitably attention turned to hedge funds. Regulators pushed forward discussions over what steps, if any, were necessary to improve oversight of what has often been viewed, rightly or wrongly, as a lightly regulated industry.
An observer could have been forgiven for experiencing a sense of déjà vu.