OAKS, Pa. (HedgeWorld.com)–The Securities and Exchange Commission’s new rule isn’t effective until Feb. 1, 2006, but some are advocating advance preparation regardless of the legal challenges reportedly in the works.
The SEI Knowledge Partnership, an effort on the part of SEI Investments’ investment manager market unit to analyze business and regulatory trends, has found that most believe hedge funds should prepare for a “new era of regulation.”
The group held a web seminar on the topic of regulation centering on the “new mindset” that managers would need to have in day-to-day operations. According to SEI, panelists said they don’t believe hedge funds will be able to keep the regulatory status quo.
“Regardless of whether the regulation is enacted or held up, we’re likely to see registration becoming a best practice that more and more institutional clients, enterprise clients and gatekeepers for high-net-worth clients will be using as a due diligence screen,” said Paul Schaeffer, director of the SEI Knowledge Partnership, in a statement.
In a survey of its 87 hedge fund adviser clients, SEI found that half of them were already registered investment advisers.
Going forward, the SEI Knowledge Partnership has determined that hedge funds will need to: keep detailed written records of all their actions and fully document performance claims; be alert to scrutiny of conflicts and their disclosure; determine the allocation of trades in advance; delay pursuing new strategies until compliance issues are addressed; and be prepared for SEC inspections.
While some of the tasks may make hedge funds feel slow and less competitive, Jim Volk, chief accounting officer and chief compliance officer for SEI’s fund accounting and administration business, said in a statement that hedge fund managers will need to remember that almost all funds will be subject to the new rule and other advisers have been subject to registration for years.
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