SEC Votes to Lift 80-Year-Old Ban on Hedge-Fund Ads

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July 10 (Bloomberg) -- Hedge funds and other companies seeking private investments will be allowed to advertise publicly for funding under a rule approved today by the U.S. Securities and Exchange Commission. Phil Mattingly reports on Bloomberg Television's "Money Moves." (Source: Bloomberg)


Phil, the biggest change here we see an apple loose a tennis tournament?

I don't know about that, but you nailed it right on.

This is a big change that hedge funds and their lawyers have been pushing for for more than a year.

The rule was due more than a year ago.

It was a key component of the jobs act.

It allows for runs to advertise to accredited investors for private placement.

The $900 billion private placement market.

This is a big deal and one that a lot of people have been looking for certainty on.

When the law was passed, everyone was really excited about what it might mean, especially for smaller funds in terms of raising capital, but there has been no real kind of continuity.

We now have that with his rulemaking today.

As far as next step goes, now what?

It -- the ban is not officially removed yet.

There's some washington technical stuff that has to take place, has to be printed in the federal register, and then we have to wait for 60 days.

Detractors will be able to comment, and there are plenty of detractors.

Particularly state attorneys who have big issues about fraud, and even an sec commissioner that was also a little concerned about fraud.

That said, end of 60 days, the ban is lifted, and these rules go to place.

What about protections that the commission put in place to try to assuage some of the concerns that some people have said?

That smaller investors, less sophisticated investors are somehow going to be sucked into something they do not understand.

That's right, and this has been at the core of why it has taken so long to finalize this will making.

Commissioner aguilar basically called it reckless and voted against it.

They put in place to primary tenets.

One is verification -- they want strong verification for firms trying to get accredited investors, which might include tax returns or sign-ups for independent brokerages, things along that line.

Another package is they are going to track in detail the kind of advertising that takes place and what kind of fraud comes of it.

Republican commissioners in the sec were not thrilled with this, and they said it would add onerous protections to this that might actually end up harming it.

However, commissioner white said this was key to the passage of this rule, and sure enough, it did clear the way to that.

This text has been automatically generated. It may not be 100% accurate.


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