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Only When the JOBS Act Is Finalized Will Hedge Funds Change


Without clarity, most hedge fund managers will stay silent. Once the JOBS Act is settled, expect attention to turn to FATCA and Form PF.

There has been a lot of chatter surrounding the JOBS (Jumpstart Our Business Startups) Act and its inevitable impact on the job market. But what impact, if any, will it have on the hedge fund industry?

"For more than 60 years, hedge funds have never been allowed to advertise," said Mitch Ackles, President of the Hedge Fund Association and CEO of Hedge Fund PR. "They haven't been allowed to do the same things that mutual funds are currently allowed to do. Many managers are advised by their legal counsel and compliance people never to talk to people like you, never to talk to a reporter. Some don't even speak at events because they're scared that what they say might be construed as a solicitation to an unqualified person."

With the JOBS Act, that could soon change.

"Some of the larger managers have been comfortable with it -- you see them on CNBC (GE) or Bloomberg TV or the Wall Street Journal," Ackles told StreetID. "Those managers tend to stick to the big picture, and this has been a safe haven for managers of all sizes. They can go on TV and be quoted in the press if they talk about their big picture view of a sector -- the economy, regulation. They can certainly give those opinions (and be quoted) and not have that be construed as, you know, trying to offer something inappropriate to someone that's unqualified that might read it."

Lack of Clarity

The real problem, however, is that there has not been any clarity regarding the things that hedge fund managers can and cannot do.

"So there's a good chunk of people that you will never see get quoted and will never want to talk to [reporters] until the JOBS Act rules [are finalized] and the SEC comes out with specifics that will guide the industry and hopefully provide that clarity that has been missing for so many years," said Ackles.

This is not the only challenge that hedge fund managers have encountered, but things are starting to get easier. "The secondary aspect of the Hedge Fund Association -- which was only established as a result of Dodd-Frank -- is our lobbying," Ackles explained. "I myself am a registered lobbyist and part of a core team of about four or five people at HFA that airdropped ourselves into DC during Dodd-Frank before everything was finalized. We were really speaking up for the industry participants that don't usually have a voice in DC -- the smaller and emerging managers."

Ackles said that the reason the Hedge Fund Association decided to take action and become lobbyists "is because the original Dodd-Frank proposal was that every manager that managed $30 million and up would need to register with the SEC."

"We thought that might impede new funds from forming," said Ackles. "It's obviously increased costs for running the business, and you would need additional service providers, legal advice, compliance, if you were to have to register at that threshold with the federal government."

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