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Alternative Market Briefing

CFTC makes it easier for hedge funds to advertise

Thursday, September 11, 2014

Bailey McCann, Opalesque New York:

Under the JOBS Act, hedge funds have been allowed to advertise to the public - at least in theory. One of the problems with the regulatory relief at the time the JOBS Act was passed was that it only applied to the SEC. The CFTC which also regulates certain aspects of hedge fund activities, said it wasn't going to change its anti-fraud rules which previously kept hedge fund from advertising. Now, all that may be changing.

The CFTC announced yesterday that it plans to ease the rules that keep hedge funds from advertising. The decision would bring CFTC rules more closely in line with SEC allowances ushered in by the JOBS Act.

Supporters of regulatory relief said that the changes are good for investors. However, there hasn't been a rush to advertise, even by funds that are not in some way governed by the CFTC. As Opalesque has previously reported, few hedge funds - outside of the largest funds - are likely to take advantage of advertising as there is little upside and a load of potential downside.

The SEC itself has noted that hedge funds that engage in advertising may invite closer scrutiny if only to ensure that the advertising falls within acceptable guidelines. This reality is enough to keep funds from diving in, and the CFTC rules basically set up the same situation.

"The recent harmonization of CFTC and SEC rules permitting general solicitation and advertising, while a sensible step, is unlikely to herald in ......................

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