WEST PALM BEACH, FL (HEDGECO.NET) – Paul Roye, director of the SEC’s division of investment management said in a statement that routine SEC examinations help the agency to identify complianceproblems for US hedge funds. Roye said, “Examinations permit us to identify compliance problems at an early stage, identify practices that may be harmful to investors and provide a deterrent tounlawful conduct.” This rationale was the main part of the basis for the new SEC law mandating larger US hedge fund managers to register their activities with the agency.
Other SEC Commissioners such as Cynthia Glassman, one of those that voted against such law, said that her staff now has oversight for not only 900 mutual fund complexes but also for those of more than 8,000 investment advisers. Glassman said, “As such, it is difficult to perceive how hedge fund advisers will be deterred by the prospect of an examination, when they know that we lack the resources to audit comprehensively their operations,” according to her.
In earlier statements the SEC Chairman William Donaldson said the trick is to change the tactics and nature of such examination. Donaldson prefers a risk-oriented mobile examination force as opposed to a large group of standing army. Donaldson said in a recent meeting, “We do have the resources if we are able to apply our manpower and expertise in an effective, risk-based system designed not only for this responsibility but ultimately as an underpinning for all examinations and inspections conducted by the commission.”
The new law will take effect in January 2006, barring legal action to stop its implementation.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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