Hedge Funds May be Allowed to Advertise

Posted on 10.03.12

A new rule being considered by the US Securities and Exchange Commission could give hedge fund managers the ability to advertise directly to investors for the first time. The proposed change, introduced as part of the Jumpstart Our Business Startups (JOBS) Act, would crack open an industry that is often perceived as secretive, according to the New York Times. Bans on advertising have prohibited hedge funds from directly marketing to investors or openly posting performance and assets figures. Many leaders in the industry support the change but are seeking clarification on who they can target as investors. However, critics argue that advertising would open the door for more fraud. Many are worried that disreputable money managers could launch massive advertising campaigns that take advantage of investors.

Industry Impact - While many large hedge funds already have plenty of clients and solid capital bases, smaller and midsize hedge fund managers could stand to benefit more from a rule that would allow them to recruit clients and build assets in the highly competitive industry.

Source: First Research http://www.firstresearch.com/ Copyright 2011, Hoover's, Inc., All Rights Reserved.