Hedge Fund Withdrawal Symptoms From SEC

Until the Securities and Exchange Commission decides on a course of action, hedge funds will remain registered, but legal observers predict mass withdrawals in the future, The New York Times reports. “The belief by many managers,” attorney Ron Geffner, who runs law firm Sadis &Goldberg’s hedge fund practice, told the Times, “is that their investors would be better served if they withdrew from registration, spent less time interacting with the SEC and jumping through their hoops and more time researching their portfolio positions and investing their clients.” The SEC, some say, is not likely to seek a rehearing on the ruling since it was unanimous, though SEC Chairman Christopher Cox has not yet announced his plans. Not everyone agrees there will be withdrawals. Attorney Jay Baris of Kramer Levin Naftalis & Frankel said in a Times interview that since many advisers went through the trouble of registering, they’ll stick with it. “It could be a marketing advantage,” he said, echoing that investors may feel safer with an SEC-registered fund. Attorney Rich Goldman of law firm Bingham McCutchen told The Wall Street Journal that he doesn’t think Cox would push the rule. It is possible, however, the Times reports, that the commission would introduce greater investor protection by upping the minimal requirement for playing in hedge funds, which haven’t changed since 1982. The news of the SEC ruling has prompted Sen. Chuck Hagel (R-Neb.) to call for further hearings on hedge funds, just a month after a committee meeting he chaired suggested hedge funds needed no further regulation beyond registration.