“I think they are trying to gauge a better understanding of hedge funds and the marketplace. There’s been a huge influx of managers who have registered with the SEC since the implementation of Dodd-Frank. They’ve updated Form ADV since Dodd-Frank and they’ve introduced Form PF to obtain more information on hedge funds than they ever have in the past based on concerns over potential systemic risk in the markets. “Dodd-Frank regulation was passed, the SEC has gathered information and digested it over the last couple of years and now they are writing guidance and taking enforcement action. We are in the final development phase of Dodd-Frank right now,” comments Mark Ruddy, attorney and founder of Ruddy Law Office, PLLC in Washington, DC. There is now a post-Dodd Frank certainty in the way the SEC operates, with Ruddy noting that the SEC “is finally prepared to more aggressively implement an enforcement programme”.
“The SEC is beginning to take a hard look at the internal controls and reporting obligations of hedge funds and investment advisers, so these firms need to take the necessary steps now to avoid potential sanctions later,” advises Ruddy. “Advisers are required to have written policies and procedures in place on who is going to vote proxies and they also need to review whether their proxy voting procedures are being complied with on an annual basis.” Just to underscore the level of scrutiny being felt by managers, the SEC has also begun its appraisal of alternative mutual funds. If regulators are looking to better protect investors in hedge funds, imagine the concerns they have over managers launching ’40 Act funds and getting access to retail money.
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