The Securities and Exchange Commission adopted rules clearing the way for hedge funds to seek more than 100 investors as long as those investors fit the definition of "qualified purchasers."
The rules implement changes made by the National Securities Markets Improvement Act of 1996. Under the law, institutional investors must have more than $25 million in assets, and individuals must have more than $5 million in investments to qualify.
But SEC Chairman Arthur Levitt Jr. made it clear the rule does not give defined contribution plans with more than $25 million in assets the green light to offer hedge funds to their participants. "The answer is 'no,'*" he said.
The agency also asked the investment management division, which oversees regulation of mutual funds and other investment companies, to reconsider a ruling given to Boston-based Standish, Ayer & Wood last year letting the money manager market a hedge fund to a defined contribution plan as long as the plan's trustees, not the participants, made the investment decision. The ruling also limited the amount that could go into the hedge fund option.
Barry Barbash, chief of the SEC's investment management division, explained the SEC wants to study the variations of retirement plans that fall somewhere between plain-vanilla defined benefit plans and 401(k) plans.