The Commodity Futures Trading Commission softened restrictions on advertising by hedge fund managers that are registered as commodity pool operators.
The commission issued an exemptive letter easing marketing restrictions late Tuesday that “harmonizes” CFTC regulations with changes made by the Securities and Exchange Commission to its similar rules, a CFTC news release said.
Both government commissions were required by the Jumpstart Our Business Startups Act to liberalize marketing and advertising rules for hedge fund managers.
The CFTC's action is “an important win for investors. These changes will bring greater transparency and competition to the hedge fund industry by harmonizing the CFTC's commodity pool operator regulations with the SEC's private offering regulations,” said Richard H. Baker, CEO and president of industry group Managed Funds Association, in a statement.
Hedge fund managers, especially commodity pool operators subject to CFTC regulation, still are unlikely to advertise their investment strategies, said attorney Howard Groedel, partner and chair of the securities regulatory compliance practice at Ulmer & Berne.
“Many of the hedge funds subject to CFTC regulation engage in specialized or esoteric trading strategies. The more critical issue for the managers of these funds is finding enough investments to make rather than raising more capital. Many of these funds are at full capacity and don't need to advertise in order to raise more capital,” Mr. Groedel said in a statement.
Even third-party hedge fund marketers downplay the allure of more liberal marketing rules.
“Very few hedge funds have decided to take advantage of the new SEC regulation primarily due to their concern about additional compliance requirements imposed on firms that register for general solicitation,” said Donald A. Steinbrugge, managing partner, Agecroft Partners, a third-party marketing specialist, in a statement.
Mr. Steinbrugge said he believes the CFTC's move “will increase the number of firms participating in general solicitation, but will still only represent a tiny fraction of the industry.”