SEC Monitoring the Use and Market Impact of General Solicitation

Simon Riveles General Solicitation, SEC, Uncategorized

At the Managed Funds Association Outlook 2013 Conference, held on October 18, 2013, SEC Chair Mary Jo White delivered a speech emphasizing the importance of transparency in the hedge fund industry.  Chair White highlighted that the JOBS Act, which allows private funds to participate in the general solicitation, increases the responsibility of private funds to be open and honest with potential clients and regulators.  Chair White announced the SEC is currently monitoring how private funds are taking advantage of the new general solicitation rule, including assessing the impact on the market for private securities as well as detecting potential fraudulent activity.                                                                                     

As for recently registered investment advisers, Ms. White discussed a new initiative of conducting “Presence Exams.”  Such exams will be shorter than normal examinations and will be conducted in-person by SEC examiners.   The aim of the examinations will be to ensure recently registered advisors are aware of their obligations under the SEC’s rules and to promote accepted best practices throughout the industry.  The four main areas of interest to such examinations include: 1) marketing, 2) portfolio management, 3) conflicts of interest, 4) safety of client assets and 5) valuation.  Though the SEC plans to work cooperatively to address any irregularities found, Chair White emphasized that if fraud is discovered it will be pursued.

In her concluding remarks, Ms. White requested further comments for a proposed rule that would require additional information for 506, Regulation D offerings.  The proposed rule can be found here.  

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