HedgeCo.net – WASHINGTON, D.C., March 12, 2007 — Managed Funds Association (MFA) submitted a comment letter to the Securities and Exchange Commission (SEC) on Friday, March 9,2007 in response to its request for comments regarding its proposed rules on “Accredited Investors in Certain Private Investment Vehicles,†(“Accredited Natural Person Ruleâ€Â) and “Prohibition ofFraud by Advisers to Certain Pooled Investment Vehicles,†(“Proposed Antifraud Rule).
MFA, headquartered in Washington, DC, is the unified voice of thehedge fund industry representing professionals who specialize in alternative investment strategies, including the majority of the world’s largest hedge funds.
Proposed Accredited Natural Person Rule
MFA said it supports the SEC’s effort to raise the financial eligibility standard for investors in private pools of capital. MFA has long endorsed raising the net worth and income thresholds, noting that the Accredited Investor standard has not been changed since 1982, and commended the Commission for addressing the issue.
“MFA is in favor of amending the Accredited Investor standard and believes that adjusting the net worth and income thresholds for inflation would provide a simple, yet effective solution to addressing the Commission’s investor protection concerns,†said John G. Gaine, president. “We believe this simple adjustment would sufficiently protect investors without added burden and complexity.â€Â
MFA said it is concerned that the Commission’s Proposed Accredited Natural Person Rule would be confusing to investors. MFA noted that the addition of the proposed definition, Accredited Natural Person, to the seven existing financial sophistication standards under current federal regulations, which include Accredited Investor, Qualified Client, Qualified Purchaser, Qualified Institutional Buyer, Qualified Eligible Person, and Eligible Contract Participant, may prove too complex.
Mr. Gaine said MFA believes raising the net worth and income thresholds under the current Accredited Investor standard would improve investor protection while mitigatinginvestor confusion and avoiding additional compliance costs for the hedge fund industry and their investors. MFA also encouraged the Commission to add a grandfather provision for existinginvestors, and to permit fund employees to invest in their employer’s funds in order to provide investors with the added protection of having employee interests aligned with investor interests.
Proposed Antifraud Rule
MFA told the Commission that it fully supports the adoption of an antifraud rule that would protect investors, and believes the Proposed Antifraud Rule, as drafted, could unintentionally cause a fund to limit investor correspondence and information.
“MFA believes the Proposed Antifraud Rule, as drafted, may have the unintentional consequence of creating a chilling effect that may cause funds to suppress information, rather than encourage more transparency and dialogue with investors,†explained Mr. Gaine.
“MFA believes the Commission is seeking increased information and transparency between funds and investors, and this Proposed Rule could inadvertently disadvantage investors who are seeking information about a fund prior to making an investment,†Mr. Gaine added.
The full text of MFA’s comment letter is posted at: www.mfainfo.org
MFA, headquartered in Washington, DC, is the primary trade association representing professionals who specialize in alternative investment strategies including hedge funds, funds of funds and managed futures funds. MFA’s over 1,300 members are affiliated with the majority of the 100 largest hedge funds, which manage a significant portion of the over $1.4 trillion invested in hedge funds. Since its inception in 1991, MFA has provided industry leadership in government relations, communications, media relations, and education to MFA members and investors.
For further information:
John G. Gaine
President
Managed Funds Association
(202) 367-1140
