WASHINGTON (HedgeWorld.com)--Letters sent to the Securities and Exchange Commission during the agency's comment period for its proposed rule for hedge funds expressed opposition to the rule by almost a 3-to-1 margin over those that supported the regulation, the Managed Funds Association reported in a statement.
Of the 156 letters received by the SEC as of Oct. 13, 91 were against the proposal to require hedge funds to register as investment advisers and 33 were in favor of it, the MFA stated. The commission received 32 letters that neither favored nor opposed the proposal but instead requested clarification on points of the proposal.
Letters in opposition came from major hedge fund managers and various ancillary companies in the industry as well as law firms that represent hedge fund managers, according the MFA. Some business associations also filed comments in opposition, including the U.S. Chamber of Commerce (see Previous HedgeWorld Story).
The MFA noted that "the majority of letters in favor of the proposal rarely exceeded one page and often contained anecdotal support or baseless claims about the industry." In addition, the MFA said, "Many such respondents were individuals with no apparent connection to the industry or no prior experience in hedge fund investing." The MFA also pointed out that, "coincidentally," the mutual fund industry is an active proponent of the new regulation.
The MFA statement outlines the major themes of the letters that opposed the regulation. Among them: the SEC lacks the legal authority to proceed; an appropriate regulatory framework already exists; the SEC has found no evidence of retailization; the proposal will impede industry growth; and mandatory registration would divert SEC resources on behalf of relatively small number of investors who are wealthy and generally sophisticated or which are institutions.
The statement also offered rebuttals to the arguments in favor of the proposed rule, and it summarized some alternatives to the regulation that were submitted.
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