Hedge Funds Ask SEC to Let Them Go Public in Private Offerings
January 13, 2012, 12:02 AM ESTBy Jesse Hamilton
Jan. 10 (Bloomberg) -- The Managed Funds Association is urging U.S. regulators to remove restrictions on solicitation and advertising in private offerings to make it easier for hedge funds to raise money and promote their products.
The Securities and Exchange Commission should amend its rules to allow private funds to “engage in communication and offering activity while remaining in compliance,” Richard H. Baker, the Washington-based lobby group’s president and chief executive officer, said in a letter requesting the rule change. An SEC advisory group on small and emerging companies voted for a similar recommendation on Jan. 6.
The change would let hedge funds avoid the SEC’s registration process while openly seeking money from so-called accredited investors, those deemed sophisticated enough to understand riskier offerings. Changes in securities markets and regulations have rendered the 30-year-old restrictions unnecessary, Baker wrote in the letter dated yesterday.
“We believe eliminating the ban would reduce the cost of capital for private funds and lead to greater efficiency in private offerings,” Baker wrote.
SEC Chairman Mary Schapiro asked her staff to rethink the measure after President Barack Obama directed federal agencies last year to ensure their rules promote economic growth while using the least burdensome tools to achieve regulatory ends.
The U.S. House of Representatives in November approved legislation proposed by California Republican Kevin McCarthy that would let closely held companies advertise for investors. A similar measure awaits action by the Senate.
“The industry is viewed as secretive, creating an unwarranted negative inference by investors and regulators,” Baker said. Removing curbs on advertising and solicitation would be “an important step in allowing a wider audience to learn about the industry,” he said.
--Editor: Gregory Mott
To contact the reporter on this story: Jesse Hamilton in Washington at jhamilton33@bloomberg.net.
To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net.
