Soon U.S. based hedge fund managers may be forced to decide to either comply with the new SEC introduced hedge fund laws, or to take advantage of the loophole which may enable them to escape suchoversight. Hedge fund lawyers believe many managers are still not sure which way to go even as time is ticking away for early next years deadline.
The new SEC hedge fund laws mandate that all U.S. based hedge fund managers managing in excess of $30million of investor assets, and 15 or more clients must register with the SEC. Another loophole which may enable hedge funds to avoid SEC registration is by establishing a minimum of two-year lock-up periods for their hedge funds.
According to reports, increasing number of managers are now considering greater lock-periods for their funds, such managers may also avoid some types of compliance training as well. Emmett Ryan, director of hedge fund compliance services at Buchanan Associates said, “Some people are looking to avoid registration because the costs are not insignificant.� Buchanan added, �A lot of people come see us to shop around and I would not be surprised if the two-year lockup periods now becoming popular didn’t find their roots in the registration process.�
Lawyers think many of the managers that may succeed in convincing their clients to keep their money locked up for two years are the only managers who achieved good returns recently. Achieving such condition may prove elusive for managers without good returns according to such school of thought. Some SEC commissioners have warned that if significant numbers of managers took advantage of the lock-up loophole, the rules may be further amended.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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