WEST PALM BEACH, FL (HEDGECO.NET) – The U.S. Securities and Exchange Commission is now targeting funds that have weak internal controls for regulatory action, said a senior SEC official to Reuters on Wednesday.
Elizabeth Jacobs, deputy director of the SEC’s Office of International Affairs said that the company is planning audits at least every three years for funds that meet this “high risk†criteria. The meeting was held at a hedge fund gathering in the Cayman Islands. The Islands are home to the world’s largest number of offshore hedge funds, numbering some 7,100 and growing.
“Funds with both a public and a private side better have solid information walls,†said Robert Nisi, in an interview with Reuters . Nisi is partner and general counsel for Cyrus Capital Partners, a New York hedge fund. “It’s very difficult to prove you are not doing something (illegal) based on information that someone else in your firm has.â€Â
The SEC’s regulatory effort is aimed at protecting investors at a time of virtually unabated growth in an industry conservatively estimated to hold $1.1 trillion in assets and possibly much more. Industry estimates vary widely for assets under management, the numbers of funds, and numbers of fund managers, who often manage more than one fund.
About 2,400 fund managers are now registered with the SEC, divulging such information as the number of funds they manage, assets under management and any history of legal violations. And SEC figures show those managers are in charge of some 11,500 hedge funds, well above leading industry estimates such as Hedge Fund Research, which puts the number at 8,800 funds. It is unclear whether the SEC figure includes funds that invest in other hedge funds, or funds of funds.
According to an estimate by Greenberg Traurig, a New York law firm with a large hedge fund practice, 35 percent of all hedge funds legally avoided registration, meaning there could be thousands more hedge funds than even the SEC calculates.
Alex Akesson
Contributing Writer
HedgeCo.Net
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