Bloomberg News

Hedge-Fund Ad Rule Said by SEC’s Walter to Boost Risk of Fraud

April 17, 2013

A regulation letting hedge funds advertise for investors could force the U.S. Securities and Exchange Commission to expand enforcement activity to guard against fraud, SEC Commissioner Elisse B. Walter said today.

Investor-protection concerns caused the SEC to miss a congressional deadline for finishing the rule called for in last year’s Jumpstart Our Business Startups Act, Walter said in testimony at a House Financial Services subcommittee hearing.

“We would have to expend examination and enforcement resources that we would not otherwise have to,” she said in addressing questions about why commissioners didn’t accelerate work on the measure as some SEC staff members suggested. The agency needed to analyze questions raised by investor advocates, said Walter, who served as SEC chairman from December until Mary Jo White took the helm this month.

The SEC issued a proposal to lift the ban on hedge-fund advertising in August, four months after the JOBS Act became law. Debate over how to proceed sparked conflict between Mary Schapiro, who stepped down as chairman in December, and Commissioner Daniel M. Gallagher, who said he was furious that Schapiro changed her mind about how to proceed.

To contact the reporter on this story: Dave Michaels in Washington at

To contact the editor responsible for this story: Maura Reynolds at

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