You choose, we deliver
If you are interested in this story, you might be interested in others from The Journal Gazette. Go to www.journalgazette.net/newsletter and pick the subjects you care most about. We'll deliver your customized daily news report at 3 a.m. Fort Wayne time, right to your email.

Business

  • OPEC seen unlikely to cut output despite oil glut
    VIENNA (AP) — OPEC oil ministers meeting in Vienna today are in a bind. Prices are plunging — and in the short term, the cartel may not be able to do much about it.
  • Toyota recalls more cars for air bag problems
    TOKYO (AP) — Toyota Motor Corp. recalled more than 40,000 vehicles in Japan today as part of a worldwide scare over defective air bags and officials are investigating a new type of air bag problem that could lead to further recalls.
  • Obama's immigration move disappoints businesses
    WASHINGTON (AP) — President Barack Obama's executive actions on immigration left out some of the business community's top priorities, disappointing business leaders who might have stepped up to defend his policies in the face of Republican
Advertisement

Ban lifted on hedge fund advertising

– For the first time, hedge funds will be allowed to advertise to the general public under a rule adopted Wednesday by federal regulators.

The Securities and Exchange Commission voted 4-1 to lift a decades-old ban that prevents hedge funds, private equity firms and other private investment managers from marketing their products to a wide audience.

Hedge funds are still allowed to sell securities only to an exclusive group of investors: those with a net worth of at least $1 million excluding their primary residence, or annual income of more than $200,000 (or over $300,000 with a spouse) in each of the two most recent years. About 7.4 percent of U.S. households have a net worth of $1 million or more.

The change, which takes effect in about 60 days, was mandated by legislation enacted last year. The law also makes it easier for small startup companies to raise capital without having to comply immediately with SEC reporting rules.

Hedge funds are investment pools that use complex trades to seek big returns. They command trillions of dollars in assets. The ban on general advertising has been in effect since 1933, during the Great Depression.

Companies and funds must verify that investors meet the financial requirements for the investments. And the SEC adopted a rule that bars convicted felons and individuals sanctioned by federal or state securities and banking regulators from participating in offerings.

Investor advocates have expressed concern that allowing hedge funds and similar investments to advertise could increase the potential for fraud.

It “will make fraud easier by allowing fraudsters to cast a wider net for victims,” Commissioner Luis Aguilar said at the meeting. He was the only commissioner to dissent.

To address the concerns, the SEC proposed to monitor the advertising and collect data on how it affects the market for private securities offerings.

On a 3-2 vote, the SEC advanced a separate rule that would require companies selling shares of hedge funds or other private investments to notify the agency 15 days before a sale and also after the sale is completed. Companies and funds also would have to provide detailed information about the types of investors who purchased the shares and how their financial qualifications were verified.

Republican Commissioners Troy Paredes and Daniel Gallagher voted against the proposal requiring advance notice of a sale and new information. The public has 60 days to comment on it.

Advertisement