Oy, Canada: Tough Times Ahead For Hedge Funds

Date: Thursday, February 22, 2007
Author: Hedge Fund Daily

Canada is turning over a new leaf when it comes to regulating hedge funds. Responding to a report last fall by the Investment Dealers Association of Canada, which came up with 65 regulations for the HF industry, the Canadian Securities Administrators is proposing new oversight measures that include hedge fund registration and background checks of HF managers and sales staff. In addition to those two requirements, there are other conditions that hedge funds must meet in order to be recognized by the 13 provincial regulators that make up the CSA. That’s just for starters. Once they pass those tests, hedge fund activity would become more of an open book, as they would have to report referral fees they receive for sending business to other firms. The impetus for the proposals, which must be extensive as they cover more than 120 pages, is to avoid a repeat of disasters such as that of Portus Alternative Asset Management and more recently Amaranth Advisors, which allegedly was caused by trader Brian Hunter, who was based in the hedge fund’s Calgary office. The draft proposals will be open for comment for four months, and if all goes well for the CSA, the recommendations could be in effect by year’s end, with a national hedge fund registry up and running by April 2008. A fringe benefit of the proposals, say market observers, is that they may finally succeed in uniting the provincial regulators into a single agency for the first time.