Opposition to NASD-NYSE Merger Looms

Not everyone is happy with the proposed merger of the NASD and NYSE regulatory areas. Registered Rep has an article on a brewing dispute, as a group of small brokerage firms are urging a "no" vote on the merger.

SEC to Consider New Rules Affecting Hedge Funds

The SEC's Sunshine Act Meeting Notice (linked above) confirms that the Commission is going to consider changing the definition of accredited investor (which will have the effect of reducing the number of individuals who can invest in hedge funds, adn to add a new fraud rule to the Investment Advisers Act of 1940.

The relevant parts of the notice:

The Commission will consider whether to propose a new rule under the Securities Act of 1933 to revise the criteria for natural persons to be considered 'accredited investors' for purposes of investing in certain privately offered investment vehicles.

The Commission will consider whether to propose a new rule under the Investment Advisers Act of 1940 to prohibit advisers from making false or misleading statements to investors in certain pooled investment vehicles they manage, including hedge funds.

NASD and NYSE Merger Announced

With an end to the speculation, the NASD and NYSE hanve announced that their requlatory arms will merge.

Mary Shapiro of the NASD will become the head of the new entity, will combine the member regulation, arbitration and enforcement units of the two entities.

The merger is expected to be effective in the second quarter of 2007 and is anticipated to save tens of millions of dollars.

Not to mention the saved time and energy in no longer dealing with two sets of rules, regulations and regulatory strategy.

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.

Cox Favors Regulatory Merger

This must be one of the talking points for the week. Mary Shapiro is in Boca Raton talking about rule harmony, and Christopher Cox is on the same theme - at the same conference.

Shapiro Seeks Rule Harmony

With the varied web of securities rules and regulations, it is good to see a regulator talking about "rule harmony." There are simply too many rules, too many overlaping rules, and sometimes even conflicting rules.

It remains to be seen if such harmony can really take place, with regulators competing for rule space, but at least we appear to be moving in the right direction.

...we have met with the industry and the New York Stock Exchange to harmonize the rulebooks of both self-regulatory organizations and we will begin to propose harmonizing rule amendments, on a rolling basis, beginning with our next Board meeting in December