Hedge Fund Advertising Rules
SEC to Rule on Hedge Fund Advertising RestrictionsIn a culmination of a several months-long wait for the SEC to finally rule on whether hedge funds can start general solicitation, the SEC is expected to make a ruling today--although it won't be completely final until later in the fall. If the Securities and Exchange Commission rules in favor of hedge funds and other private investment vehicles it could open up a floodgate of advertising for previously restricted funds--although it's more likely to be a trickle at least at first, according to the Wall Street Journal. Importantly, hedge funds will still have to make an effort to qualify investors as accredited and there is no change to the restrictions on who can and cannot invest in the funds.
Still, don't expect to see Bridgewater Associates Arena anytime soon, as few in the industry anticipate a rush to embrace the type of major sponsorship and advertising that the banking industry has long relied on. A few like SkyBridge Capital's Anthony Scaramucci are looking to wade into the advertising game, already meeting with a Madison Avenue advertising firm in anticipation of the ruling.
"Invest in hedge funds: because you are worth it."
"Alternative investments are it."
"It's not your father's hedge fund."
Those are just a few hypothetical slogans that could appear on a billboard near you as a result of a planned relaxation of a ban on hedge-fund advertising.
While many hedge funds say they aren't rushing out to buy up TV ads and rename sports stadiums like their more visible brethren in the banking world, they are testing the waters for what the new freedom could mean for this opaque industry.
U.S. regulators are expected Wednesday to propose loosening restrictions banning private-investment firms from advertising—a provision contained in the Jumpstart Our Business Startups, or JOBS, Act.
The new law, passed in April, directs the U.S. Securities and Exchange Commission to reverse a long-standing ban on general solicitation for certain private offerings so long as firms take reasonable steps to verify investors in these deals are "accredited investors," institutions or people who meet certain lofty income or asset thresholds. Some hedge funds adhere to stricter criteria. Source