WEST PALM BEACH, FL (www.hedgeco.net) – SEI Investments has outlined in its white Paper called, “Countdown to Hedge Fund Adviser Registration: Essential Steps to Take Now”, the top issues for hedge fund managers to resolve prior to complying to the SEC’s new hedge fund law which will fully go into effect in February 2006. Jim Volk, Chief Accounting Officer and Chief Compliance Officer for SEI’s Investment Manager Services business said, “It would be a mistake to think of registration as merely an exercise in completing paperwork. It is about getting your business ready to operate in a regulated environment – and many aspects of that will be new to previously unregistered advisers.”

According to the SEI White Paper, hedge funds must address issues such as, “Conflicts of interest.” Conflicts include those implicated by an adviser’s brokerage practices, especially concerning the use of soft dollars. “It’s critical that your soft dollar agents be consistent with your obligation to pursue best execution,” said Phil Masterson, an SEI in-house attorney. He observed that a pending rule is likely to limit the use of soft dollars to research reflecting a unique intellectual content.

According to the White Paper, Hedge Funds must also develop trade allocation practices, which must be “fair and equitable” to each client over time. Consistency is important and exceptions, in the rare instances that they occur, should be documented and disclosed. They must also implement good policies for handling trade errors, and must avoid using soft dollars to compensate brokers for absorbing losses. Hedge fund managers must also avoid preferential treatment for some of their clients, and to reduce the chances of lawsuits, they must also pay for capital introductions made by a broker-dealer registered in the state where the introduction was made.

SEI also recommended that Fund managers must also have a written code of ethics to address issues concerning short selling, accepting gifts and trading restricted stock, and cover employees and their families as well. Other issues identified include valuation practices, adviser performance advertising, proxy voting procedures and E-mail retention procedures. SEI Investments is one of the leading global providers of asset management services and investment technology solutions. The firm administers $312.0 billion in mutual fund and pooled assets, manages $130.7 billion in assets, and operates 22 offices in 12 countries.

Paul Oranika

Contributing Writer
HedgeCo.Net
Email: Editor@hedgeco.net

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