Regulation and Oversight of the Global Hedge Fund Industry

March 15, 2012 James Heinsman Hedge Fund News

Once again hedge fund investing has become headline news. It may surprise many to know this, but domestic hedge fund investing is highly regulated and global hedge funds are also subject to many rules and regulations protecting investors.

Beginning as early as 1933 with Regulation D under the Securities Act which was ratified by Congress that year, hedge funds were restricted to raising capital only in non-public offerings. They were also limited to investors of two main types. These could be investors who were “accredited;” or it could be those who had a net worth of at least $1 million or a yearly income of a minimum of $200,000 over the past two years with a reasonable assurance that they will earn the same amount in the current year.

More recently, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law in July of 2010. This law, as a reaction to the financial crisis of 2008, was designed to create new regulations or to have better enforcement of old regulations with the goal of improving the overall financial stability of the US. Many of the Dodd-Frank reforms directly affect the regulation and supervision of global hedge funds and global hedge fund advisors.

With so much discussion in Washington about the best ways to regulate US investing, it is no surprise that there are organizations which advocate on behalf of hedge funds. One such organization, Managed Funds Association (MFA), represents the global alternative investment industry, including global hedge funds. They work to create appropriate industry practices and public policies which encourage transparent, efficient and fair capital markets.

As global hedge funds are highly regulated, with organizations such as MFA working to create more oversight, it is clear that investing in domestic and global hedge funds is a reasonable choice for certain investors, helping to further stimulate the economy through alternative investment strategies.

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