Hedge fund managers are increasingly nervous about getting a knock on the door from U.S. securities regulators now that a new rule requires them to register as investment advisers and provide lots of data about their inner workings as a result.
Hundreds of large managers, which already employ sizable legal teams, took the mechanics of meeting the
The cost of paying lawyers and adding compliance workers to ready for the new requirement, which was part of the Dodd-Frank financial reform act, generally proved most burdensome for funds with less than
Now a far bigger concern for the industry is what the
"What worries big hedge fund managers the most right now are the chances of having an
The new rule, among other things, requires funds to provide information about any affiliates, potential conflicts of interest and details about their investors.
The push to require hedge fund managers with
Now, for the first time, powerful hedge fund managers like
Thanks to the registration process, anyone with access to a computer can now look up some of the basic information hedge funds must now provide to regulators on the
"Registration does not mean hedge funds can now sit back and relax, as they are effectively on the line now," said
To be sure, for some big and well-known hedge fund managers the arrival of the registration deadline is no big deal. Managers like
"I'm not aware of anything that would provide a basis for such a view," he said.
So far this year, the
Examiners are likely to look most closely at which prime brokers, accountants, and auditors hedge funds use; how much money they have under management and whether that number fluctuates dramatically; and what types of investment strategies managers are pursuing, lawyers and consultants said.
"The exams that will be done now are all risk-based," said
In addition to the data the funds have to submit this week, many will be required to submit a so-called Form PF starting in a few months. That data is meant to be used by the
"There is also significant concern about the protection of the proprietary information collected through this process, though the
Despite many of the worries, a number of newcomers to the industry took the process in stride as part of an evolving industry where investors like pension funds simply demand more transparency.
McGuire had plenty of experience with registration having previously worked at Ackman's
"As a newer fund we had the advantage of being able to establish these procedures at the very beginning and to capture all the information we need to meet the requirements," said McGuire. "But for a multi-strategy fund that has been around for years and has eight offices around the world, I can see how the process might have been more cumbersome," he added.
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