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The Editors

Hedge-Fund Ads Might Spawn Frauds Unless SEC Takes Action

Congress probably didn’t mean to turn the $2.3 trillion hedge-fund industry into a breeding ground for fraud when it passed a law designed to make it easier for small companies to raise capital. That may well be the result unless the Securities and Exchange Commission steps in with new rules.

Congress passed the Jumpstart Our Business Startups (JOBS) Act with bipartisan support, and President Barack Obama signed it into law in April. Among its provisions, this misguided piece of legislation allows so-called private placements and hedge funds, lightly regulated private investment pools that serve the wealthy and institutions, to advertise their wares to the public for the first time.