If the Managed Funds Association has its way, hedge fund managers will be free to advertise and market their funds.
At the invitation of the Securities and Exchange Commission, the hedge fund industry organization submitted a petition requesting that the ban on general solicitation and advertising by private investment funds be lifted. The marketing prohibition is contained in Rule 502 of Regulation D of the Securities Act of 1933.
Amending the rule would allow managers of hedge funds and other private funds to “engage in public communications and offering activity” while maintaining the requirement that only qualified investors be allowed to invest in these funds, wrote Richard H. Baker, MFA's president and CEO, in a Jan. 6 letter to the SEC.
“The SEC has made a good decision in inviting recommendations for securities regulations that need review. Eliminating the ban on general solicitation would help to increase the transparency of the hedge fund industry and bolster the ability of sophisticated (institutional) investors to gather information on private funds, while allowing the SEC to maintain strong investor protections,” said Stuart Kaswell, general counsel of Washington-based MFA.
“We are considering whether the rules should be revised consistent with our capital formation and investor protection missions,” said John Nester, an SEC spokesman, in an e-mail.