Hedge Funds Under the Gun to Meet New SEC Deadline
Deadlines are quickly approaching for the majority of hedge funds to register with the Securities and Exchange Commission, which mandates more disclosure requirements over the $1.3 trillion industry, as a result of the Dodd-Frank financial overhaul law.
"The old filing documents used to be a kind of check-the-box questionnaire. These new filing documents, they have to write a brochure in plain English describing these things—really providing a narrative of their own firm and they have to electronically file it and the SEC is going to post it to their public website," Sandy Kaul, head of U.S. Business Advisory, Prime Finance at Citigroup told CNBC's "The Strategy Session" on Thursday.
It's tough to opt out if you have more than $150 million in assets under management, she added.
"The larger funds, which is the whole goal of the Dodd-Frank Act to monitor, I think, that most of them have a compliance program in place and they are either already registered or they're thinking about registration. This is just an additional layer, I think, for them, in terms of transparency," Kaul went onto say.
World's Largest Hedge Funds:
- Bridgewater: Assets under management $59.9 Billion
- JP Morgan: Assets under management $45.5 Billion
- Paulson & Co: Assets under management $36 Billion
"It's the more, I'd say, medium to smaller-size hedge funds that might not have registered that might have to really make some tough decisions," she said.
Two main categories are exempt from this: venture capital funds and family offices. They do not have to register with the SEC.
"The only other category people are looking at is if you are a foreign private advisor. If you have more than 15 or more clients in the United States and the AUM from those clients equal $25 million or more, or if you have a place of business in the US, you are going to have to register," Kaul concluded.
Two key compliance dates: June 6, 45 days prior to the registration deadline, funds are strongly encouraged to file by this date. And on June 21, all registrations must be processed and approved by the SEC.
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