Managed Funds Association testimony to congress

A link to the MFA testimony to congress about hedge fund regulation can be found here.

An extract of the testimony is below:

MFA agrees with the SEC’s conclusion that it is no longer appropriate for hedge funds to be sold to natural persons who fall within today’s definition of Accredited Investors. MFA has long endorsed raising the financial standards in Regulation D as a means to address the SEC’s concerns about the “retailization” of hedge funds and the effect of inflation on income and net worth standards as they relate to the “accredited investor” definition.19 We have, however, some specific concerns about the proposed new Accredited Natural Person Rule, including its high degree of complexity and the potential for confusion on the part of investors, as well as added costs. MFA has explored these issues fully in our comment letter, dated March 9, 2007, to the SEC on the proposed rule. We ask Congress to consider ways to encourage greater consistency among financial sophistication standards across all regulatory agencies over which it has oversight for the benefit of investors and fund managers alike.

Regulators have also linked investor protection issues to regulations that require investment adviser registration with the SEC. With respect to the registration of hedge fund advisers, we believe the current statutory regime is sound. The vast majority of the top 100 hedge funds in the world are managed by SEC-registered advisers. In the past, mindful of the need of the SEC to gather data on the industry, we have proposed to the SEC that unregistered hedge fund advisers could be required to notify the SEC of its intention to operate as a hedge fund adviser in reliance on the relevant exemptions. Our proposal provided for a notice that could include certain basic census information about the hedge fund adviser determined to be necessary or appropriate. In the future, regulators may wish to re-visit our proposal.