Friday, December 15, 2006

Change in Hedge Fund Investor Criteria Approved

In its recent meeting, the SEC approved a proposal to add a new criteria for hedge fund investing. In addition to the $200,000/$1 million floor, the Commission will add a requirement that the investor has at least $2.5 million in assets to be eligible to invest in hedge funds - excluding real estate investments.

The Commission also approved additional anti-fraud rules for hedge funds, which might be more of a political, face-saving move than substance, since the anti-fraud provisions of the various securities acts already apply to hedge funds. We have not seen the proposals yet, but various media outlets are reporting that the new regulations will limit, or eliminate, side letters.
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