SEC rule proposals would shake up hedge fund practices (FundFire)

Increased regulatory oversight, more compliance requirements and greater costs are all on the table for hedge funds in light of recent SEC rule proposals. Included in what would be numerous new requirements, SEC registered hedge funds would need to provide quarterly statements to investors that include performance, fees and expenses. Additionally, annual audits of each fund would be required for greater disclosures of side agreements and certain business arrangements. FrontLine’s Founder and President Amy Lynch comments that the proposals raise a myriad of questions that may only be resolved once the rules are in their final form. For instance, Ms. Lynch explains that it’s unclear whether the audit provision would be an all encompassing review since many managers utilize an audit exemption under the Custody Rule. She also adds that greater clarity is needed from the SEC on what the new quarterly statements should look like, and what information needs to be sent to investors. See FundFire (subscription required), “Hedge Funds Question Costs, Fees of SEC’s Proposed Rules”