четверг, 31 марта 2016 г.

Legal Framework for Hedge Fund Regulation



There is absolutely no statutory meaning of the phrase "Hedge Fund." The field accepted definition is simply because they are privately offered investment vehicles in which the contributions of your high value participants are pooled and dedicated to a portfolio of securities, commodity futures contracts, or some other assets. Investors are generally in the position to redeem their investments using a quarterly, semi-annual or annual basis. A high net worth participant (or even a qualified purchaser) as defined by Securities Exchange Commission (SEC) is definitely an individual by having an asset base of $ 1 million dollars and an institution or possibly a fund or possibly a trust with the asset base of $ 5 million. Besides this statutory limit, investment in hedge funds is largely the preserve of sophisticated investors who have the required knowledge to gauge the danger associated with buying this asset class.

Though the original purpose of hedge funds was to invest in equity securities and utilize leverage and short selling to "hedge" the portfolio's exposure to movements with the equity market, this remit has altered. Today, hedge fund advisers use labyrinthine investment tips and techniques to improve investor returns and lots of are extremely active in the trading of securities, representing between nearly 20% of equity trading volume in america securities market.

Ben Axler of Spruce Point Capital

Regulating the Hedge Funds

Probably the most clamorous reasons cited from the votaries of regulating the Hedge Fund market is the incredible growth and development of hedge funds plus the increased influence and power that hedge funds are experiencing in the stock markets. The industry is attacked to be secretive, involved in risky behavior and effective at unduly influencing global economies and corporate activities. A rise in fraud cases involving hedge fund advisers, juxtaposing with a rise in exposure of unsophisticated small investors for the perils of hedge fund investing has enticed the policymakers and regulators to take the hedge fund industry under greater scrutiny. Hedge Funds were largely held accountable to the South East Asian Economic crises from the late 1990s, the failure of the long run Capital Management Fund in the united states in 1990s and its particular subsequent $ 3.5 billion bailout from the Federal Reserve Bank to counteract the cascading collapse of global financial markets; and also the current surge of your Bombay Stock Exchange SENSEX, which even surprised the Indian Finance Minister about comprehend the reasons for a really surge, creates a disagreement that some sort of regulation really should be encouraged for hedge Funds.

We have witnessed studies into the potential for direct regulation undertaken in the last number of years by such bodies as being the Basel committee on banking supervision, the International Organization of Securities Commissioners and possibly most significantly, the US president's working group on financial markets. However, no major regulatory body has advocated direct hedge fund regulation.

Self Regulations:

Though there is not any statutory obligation to create a public disclosure, hedge funds provide their potential investor with a private placement memorandum that discloses information about the overview and investment strategies with the hedge fund. The memorandum offers the adviser along with the maximum flexibility in selecting, shifting and modifying its strategies and arms him with broad discretion in valuing hedge fund's assets. Hedge Fund investors generally receive some ongoing performance information, risk analysis and portfolio profiles from their hedge fund advisors. Most hedge funds retain an auditor to conduct an independent audit which if certified is prepared using generally accepted accounting principles (GAAP). Market competition has also generated a growing demand with the investors for business-unit level SAS 70 assessment (Statement on Auditing Standards No.70 Service Organizations,) by reputed firms.

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