There are few products in the world with as many confusing and contradictory marketing constraints as hedge funds in the US (and, in fairness, many other jurisdictions).  Hedge fund marketers out there know what I’m talking about.  Last month, we told you about a study that compared hedge fund regulatory regimes around the world to see if the lax ones were more popular.  Despite carrying the mantle of the free market, the US actually had a very restrictive regime when compared to countries such as Australia, Canada, Japan, and even China.

An article in this month’s Journal of Financial Transformation illustrates why this is.  The piece, titled ”Hedge fund marketing in an era of regulatory uncertainty” covers many of the issues faced by those trying to raise money in the US.  It’s a great update on the ebb and flow of SEC edicts over the past year and was co-authored by hedge fund personality James Hedges.

The article describes Congress’ response to the SE having the rug pulled out from under them on hedge fund registration back in 2004.  Sensing an opportunity after manager Phil Goldstein successfully challenged the SEC’s registration rule, Congress stepped into create a “legislative override”.  While leaving the registration issue in Congress’ capable hands, the SEC embarked on an anti-fraud rule that makes it illegal to break the law (see related posting).

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