Anyone working a hedge fund job is about to be affected by a major change to a decades-old policy.
Last week, the Securities and Exchange Commission voted down a ban on "general solicitation" by a variety of private issuers, including private equity funds, start-up companies, and hedge funds. Hedge fund advisors and firms will soon be able to publicly discuss and advertise their investment opportunities – so long as they follow the government's standards. Issuers will also be able to publicize their past performance and financial statistics, which was previously prohibited.
However, hedge funds must still remain committed to only selling their offers to accredited investors. For a sole individual, accreditation requires a net worth over $1 million. It may seem like a high threshold – but millions of Americans meet the requirements.
"We're living in a world where hedge funds are increasingly mistrusted; a bit of openness and transparency will help their cause a great deal," Felix Salmon wrote in a column for Reuters.
Salmon indicated he feels that an uptick in media presence, and the improvement in market transparency that will come with it, can only improve consumer confidence in hedge funds. While he doesn't speak out against media advertisements, he makes it clear that the lifting of the ban will affect hedge fund jobs in many ways, some unforeseen by many experts.
"For me, that's the most exciting part of the new world," declares Salmon. "If I follow someone on Twitter who seems consistently smart and ahead of the market curve, that's going to be much more effective, in terms of getting me to invest with them, than any glossy marketing solicitation or television ad."
New rules, and new standards
Alongside the new policy, the SEC issued a 185-page document detailing the provisions that must be followed by anyone advertising an affected business. And while hedge funds will now have a semblance of autonomy in finding new clients, they abide by a number of restrictions.
As mentioned, they must only sell to accredited investors, but even their advertisements must be vetted. Any firm taking advantage of the new rules will be required to submit a form to the SEC detailing their advertisements, and they must file said form at least 15 days prior to the initial deployment of the advertisement. And the new provisions haven't taken their place quite yet – the decision lifting the ban has not yet been entered in the national register, and once it does, it will be another 60 days before the policies go into effect.