On April 1, 2011, the U.S. Securities and Exchange Commission (SEC) updated its response, “Staff Responses to Questions About the Custody Rule” (the “FAQ”), which provides responses to questions about the rule 206(4)-2 (the “Custody Rule”). Hedge fund law firm Rothstien Kass reported. One particular FAQ, VI.8B, provides guidance to investment advisers who manage pooled investment vehicles that invest in unrelated fund of hedge funds.
According to the fact pattern in FAQ VI.8B, a “top-tier” pool that invests 10% or more of its total assets in one or more unrelated fund of funds may not be subject to SEC enforcement action if it failed to meet the 180-day requirement to distribute audited financial statements to investors.
As indicated in the response to FAQ VI.8B, the Division of Investment Management would not recommend enforcement action to the SEC under rule 206(4)-2, if the audited financial statements of the top-tier pool are distributed to investors within 260 days (an additional 80 days after the fund of funds delivery deadline of 180 days) of the top-tier pool’s fiscal year-end.
The responses to FAQs are prepared by the staff of the Division of Investment Management in regards to rule 206(4)-2, under the Investment Advisers Act of 1940. The responses represent the views of the staff of the Division of Investment Management. The responses are not a rule, regulation or statement of the SEC, and the SEC has neither approved, nor disapproved, this information. Investment managers should discuss this topic with their legal counsel.
About Alex Akesson
Alex has been specializing in hedge fund and alternative investment news since April 2006. Working mainly in research and manager interviews, she has published breaking news on the hedge fund industry on her blog, as well as several industry publications.
Her access to hedge fund managers gives her insight into news stories as well, and the ability to track press releases and other breaking news in real time.
Hedge Fund Hot Topics: SEC Updates Response to Custody Rule
On April 1, 2011, the U.S. Securities and Exchange Commission (SEC) updated its response, “Staff Responses to Questions About the Custody Rule” (the “FAQ”), which provides responses to questions about the rule 206(4)-2 (the “Custody Rule”). Hedge fund law firm Rothstien Kass reported. One particular FAQ, VI.8B, provides guidance to investment advisers who manage pooled investment vehicles that invest in unrelated fund of hedge funds.
According to the fact pattern in FAQ VI.8B, a “top-tier” pool that invests 10% or more of its total assets in one or more unrelated fund of funds may not be subject to SEC enforcement action if it failed to meet the 180-day requirement to distribute audited financial statements to investors.
As indicated in the response to FAQ VI.8B, the Division of Investment Management would not recommend enforcement action to the SEC under rule 206(4)-2, if the audited financial statements of the top-tier pool are distributed to investors within 260 days (an additional 80 days after the fund of funds delivery deadline of 180 days) of the top-tier pool’s fiscal year-end.
The responses to FAQs are prepared by the staff of the Division of Investment Management in regards to rule 206(4)-2, under the Investment Advisers Act of 1940. The responses represent the views of the staff of the Division of Investment Management. The responses are not a rule, regulation or statement of the SEC, and the SEC has neither approved, nor disapproved, this information. Investment managers should discuss this topic with their legal counsel.
About Alex Akesson
Alex has been specializing in hedge fund and alternative investment news since April 2006. Working mainly in research and manager interviews, she has published breaking news on the hedge fund industry on her blog, as well as several industry publications. Her access to hedge fund managers gives her insight into news stories as well, and the ability to track press releases and other breaking news in real time.