Dodd-Frank Expands Requirement for SEC Registration to Hedge Funds
March 28, 2011 (Business Wire) Implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") will force the largest hedge funds that pose the most risk to the system to register with the SEC and make active compliance an important element in the growth and sophistication of the overall private fund industry, according to Dodd-Frank Private Fund Manager Regulation: A New Era of Compliance a new white paper from Citi Prime Finance.
In the paper co-authored by Citi and ALaS Consulting and published today, Citi Prime Finance examines the impact of Dodd-Frank on hedge funds and other private funds and sees the new rules as an "equalizer," putting private funds' regulatory disclosures and compliance practices on par with those of traditional asset managers governed by the Investment Adviser's Act of 1940 and the Investment Company Act of 1940. With more and more institutional and sophisticated individual investors seeking out alternative investments, Citi Prime Finance expects private funds to emphasize comprehensive compliance programs as a commitment to transparency and well-structured operations.
"Hedge funds complying with Dodd-Frank will need to do more than just respond to written regulations in a manual," said Richard Webley, US head of management consulting at Citi Prime Finance.
"Hedge funds and other private funds must actively assess their operations, identify potential risks and conflicts, and tailor their own procedures to the new regulatory requirements. Many firms have already begun to identify the steps needed to comply, including registration with the SEC and implementation of compliance programs. All of the recent regulatory developments amount to a significant paradigm shift in the Hedge Fund Industry," Steve Lipof, head of ALaS's Compliance and Regulatory Practice, said.
"A major element of Title IV of Dodd-Frank will affect private fund managers previously relying on exemption from registration under the Investment Adviser's Act of 1940," said Mr. Webley. "Now, a vast majority of private fund managers will operate under a general registration requirement."
The paper details the specific types of funds which may be exempt from registration requirements, including private fund advisers managing assets of less than $150 million and acting solely as an investment adviser to one or more qualifying private funds.
The paper also describes:
Which firms must register with the SEC or State Regulators
The changes in registration content and form which affect both currently registered and managers new to registration.
The emerging definitions of the role of the Chief Compliance Officer
How to build out a robust compliance program which is sustained within the firms daily operation
Copies of Dodd-Frank Private Fund Manager Regulation: A New Era of Compliance are at: http://icg.citi.com/icg/about_us/press_release/citi_prime_finance.jsp or can be obtained by contacting firstname.lastname@example.org