The Commission's staff estimate that approximately 40 to 50 percent of all hedge fund advisers are currently registered with the Commission. Registration under the new rule would permit the Commission to:
- Collect and provide to the public basic information about hedge funds and hedge fund advisers, including the number of hedge funds operating in the United States, the amount of assets, and the identity of their advisers.
- Examine hedge fund advisers to identify compliance problems early and deter questionable practices. If fraud does occur, examinations offer a chance to discover it early and limit the harm to investors.
- Require all hedge fund advisers to adopt basic compliance controls to prevent violation of the federal securities laws.
- Improve disclosures made to prospective and current hedge fund investors.
- Prevent felons or individuals with other serious disciplinary records from managing hedge funds.
A "private fund" would be one that
- would be an investment company but for the exceptions in Sections 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940;
- permits owners to redeem their ownership interests within two years of purchase; and
- is offered based on the investment advisory skills, ability or expertise of the investment adviser.
Comments on the proposed provisions should be submitted to the Commission by September 15, 2004.
The full text of the detailed release concerning this proposal will be posted to the SEC Web site as soon as possible.