S.E.C To Be Sued Over Hedge Fund Advtisement Ban

A lawsuit is going to be brought against the Securities and Exchange Commission by Phil Goldstein, the hedge fund manager who unseated plans to require registration of hedge funds, in an attempt to raise restrictions currently in place regarding the advertisement of hedge funds.

As hedge funds have become increasingly publicized in the media, the current understanding of the ban on hedge funds advertising themselves and releasing only minimal information about their companies has come under closer scrutiny.

Goldstein has stated that he wants to be able to have the same kind of information resources for potential clients as any other company would, such as websites. He further went on to point out that whilst many businesses can have websites, like gun shops and state lotteries, only hedge funds and pornography were required to pre-qualify.

The lawsuit should be filed within the coming weeks in the district of Washington DC court and that it will request a declaratory judgment and look to have the current laws imposed by the SEC ruled out.

Goldstein did approach the issue with the SEC and even stated he would pursue legal means if necessary, however the manager of the Bulldog Investors fund didn’t hear back by the prescribed date. The SEC spokesperson has yet to make any comment on the issue.

This isn’t the first run in between the two groups, as William Galvin, the Massachusetts securities regulator, last year brought allegations against Bulldog Investors for relaying information to an unqualified investor as a response to an email.

Goldstein has stated that under the First Amendment he has the complete right to host data about his company on the company’s website. It was thanks to Goldstein that two years ago the attempt by the SEC to require all hedge funds to register with them was not followed through on, as he brought the plan to a halt via legal action.

Whist hedge funds are not altogether barred for advertising, according to U.S. rules only those investment funds which are registered, like mutual funds, are allowed to seek money from the public. This law has been standing since the 1930′s

In 2003 the SEC actually recommended that the ban be lifted, so long as the people who could actually invest still remained restricted.

The accordance with this rule by hedge funds differs widely, with some not talking about the business at whilst others are very tight lipped about themselves, however the majority does have a limited amount of information out there about themselves..

Most hedge funds provide limited information.

Story link: S.E.C To Be Sued Over Hedge Fund Advtisement Ban