Hedge fund advertising demystified

A recent Peppercomm study on the changing hedge funds communications landscape found that quite a few hedge funds are beginning to think about and execute strategic communications in the form of engaging with stakeholders on social media platforms (Twitter, LinkedIn), opening up their web sites and promoting thought leadership content in an attempt to build brand and reputation.

Yet, 16 months after the enactment of the JOBS Act, many hedge fund managers still remain unsure as to which marketing activities they can engage in, and confused over federal and state laws as well as the SEC's plans to implement its own rules.

Irwin Latner, who until recently headed the hedge fund group at New York-based Herrick Feinstein LLP, and who has just joined the law firm Pepper Hamilton LLP, gave Opalesque some clarification on hedge fund advertising.

Opalesque: Please tell us about the different areas of confusion with regards to hedge fund advertising.

Irwin Latner: The JOBS Act was passed in 2012 and to date, according to published reports, not very many private fund managers have taken advantage of the new advertising authority under Rule 506(c). In particular smaller managers have not utilized it in spite of the apparent benefits of increasing branding and exposure potentially growing AUM.

There are several reasons for this, one of which was the lack of harmony between the JOBS Act's authority to use advertising and the exemption from registering as a Commodity Pool Operator with the CFTC where the manager engages in a de minimis amount of futures' trading. Up until recently, that de minimis exemption from CFTC registration was conditioned on not advertising......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.