Atkins Calls For Openness

Date: Wednesday, February 7, 2007
Author: HFN Daily Report

Paul Atkins, a powerful member of the Securities and Exchange Commission, is calling for the agency to bring hedge funds out of the shadows.

Speaking last week before the ninth annual Alternative Investment Roundup in Scottsdale, Ariz., the Republican commissioner called into question the agency's practice of not allowing funds to market themselves to the general public. He said the SEC's rules were creating unnecessary secrecy within the industry.

"Rather than talking about how hedge funds 'operate in the shadows,' let us take a look at the regulatory constraints on hedge fund advisors that stop them from saying anything about their funds publicly," Atkins said.

Atkins argued the SEC should consider undertaking a revision of Form D, under which hedge funds are categorized. He said the SEC should consult with fellow agencies, fund managers and investors to come up with common sense rules. He noted the government is already proposing hedge funds complete anti-money laundering information requests, and other disclosures could be required as well.

The commissioner also defended raising the requirements to invest in hedge funds. He said years of inflation and rapidly rising housing values have expanded the number and kinds of people who meet accreditation standards.

At the same time, Atkins recognized the proposal might have to be fine-tuned. He invited comments on whether the level of the proposed $2.5 million threshold was appropriate and whether hedge funds and private equity should be treated differently.

Already, a number of individuals have sent the SEC comments about the proposed rule, and most of that feedback has been negative. One comment posted on the SEC's Web site said the new rule would create a "privileged playing field for the ultra wealthy" and was "against everything our democratic society is built on."