Monday, November 13, 2006

Accredited Investor Change in the Works?

On of the alleged reasons for hedge fund registration was the SEC's allegation that small investors were getting into hedge funds. Of course, such an event is impossible if existing rules and regulations were enforced, since the small investor does not meet the financial requirements to invest in a hedge fund.

Assuming that we want the SEC to have such parental control over investors, my suggestion was to raise financial definition of an accredited investor. Without accredited investors, a fund cannot charge a performance fee. So, instead of $1 million or $200,000, make it $2 million or $500,000, that would keep any small investor out of the funds.

That may be coming. Commissioner Cox spoke about exactly that, and rule proposals will be made in December.
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