Hedge Funds Express Concerns Regarding Financial Reform
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At a New York City Roundtable hedge fund managers and chief compliance officers expressed their concerns about new regulations for hedge funds. Key topics of concern for hedge funds included: |
- Custody Rules - and the need for ongoing guidance which is currently being met through Q&A.
- Foreign Investors - which have a low threshold for registration may jeopardize foreign client relationships by having to warn investors the SEC may be calling.
- Pay-to-Play Policies -
- Concerns that a new hire will lie about hiring and firing and difficulties in truly conducting a thorough background check in the former case
- ADV Part II - will be available in the new plain English format, through the IARD system for anyone, including competitors, to view.
- Whistle Blowers - there is a possible preference to address potential issues where hedge funds develop a strong top-down compliance approach in which the CCO is a known person and resource to go to in these situations.
- Disclosures and Communications - Experienced CCOs know that for the newly regulated funds there may be a learning curve to get the CEO and portfolio managers on the same page as the CCO - so that all communications need to be approved by the CCO and general counsel.
- Funds may want to prepare an RFP approved database of responses.
- Concerns regarding what might be deemed as selective disclosures and information potentially available through the Freedom of Information Act (FOIA)
- Diligence Policies - Due diligence records could be misread without proper context or details on decision making process after due diligence information received.
- Need for more Guidance - There are ambiguities in new financial regulations that could leave open holes despite best compliance efforts. Hedge Funds should remain involved in the legislative dialogue as the meaning of these rules are being determined, and if anonymity is important to funds who may want to be more vocal - they can work through outside counsel, consultants, and trade organizations to maintain anonymity.
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