Hedge fund back-tests and beer labels: sales manipulation or important disclosure?
Nov 15th, 2007 | Filed under: Hedge Fund RegulationNews of the latest regulatory scrutiny for hedge funds began circulating earlier this week and yesterday made the pages of InstitutionalInvestor.com. The Ontario Securities Commission (OSC), Canada’s de facto securities regulator, released a review of the sales practices of “non-prospectused” (non-mutual fund) funds in that province. Although only about 1 in 20 AllAboutAlpha.com readers are inhabitants of that locale, what the OSC has to say will resonate with anyone in the hedge fund business from Sydney to Zurich to San Francisco.
First, A sober second thought…
Headlines such as “Hedge funds marketing gets failing grade” and “HFs Mislead in Mysterious Ways“, “Securities regulator tightening up on marketing practices of hedge funds” are unfortunate and misleading since the OSC’s review was actually conducted not on hedge funds per se, but on “portfolio managers of non-prospectus qualified investment funds…that catered to large institutional investors and…a variety of clients, including private clients.”
The subsequent recommendations suggests that many of these were traditional institutional managers and wealth manager who managed traditional private client accounts. (The OSC provided its “suggestions” only and did not actually “tighten” up any practices.)
It appears as if one major Canadian newspaper may have even back-peddled a little on the hedge fund finger-pointing. It’s online story on November 9th was apparently originally titled “Hedge fund marketing gets failing grade” (click here for screen shot of Google cached image from 6:30pm GMT November 9), but was quickly broadened to “Money Managers’ marketing gets failing grade” (click here for screen shot taken at 3pm GMT November 15).
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