WEST PALM BEACH, FL (www.hedgeco.net) – The new SEC Hedge Fund law provides a loophole to Hedge Fund managers who do not want to register their activities with the agency. Such managers must placetheir client�s assets into a two-year mandatory lock-up period. However it remains uncertain if many hedge fund managers may do just that.
According to Section 3 of the Investment Company Act of 1940, there are additional loophole exemptions, which may be used to avoid registering with the SEC. One loophole is 3-c3, which offers exemptions to banks and insurance company pooled funds from registering with the SEC. Robert Rosenblum of law firm Kirkpatrick & Lockhart however believes such a loophole is simplistic.
Other loopholes may emanate from the definition of an �Investment Company�. According to the SEC, futures are not securities, so either ACT of 1940 registrations, or the new IAA rule would not cover a hedge fund trading solely in futures. Under such scenario, portions of the assets held by those funds could be devoted to spot markets because the SEC law specifies that; �a company may trade in securities up to 40% of assets without being a registered investment company.� Hedge funds which trade on mortgages or taking title to real estate could also use Section 3-c5 to apply for SEC exemption.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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