SALT 2012: JOBS Act offers exciting opportunities although managers warned not to jump the gun

11 May, 2012

The JOBS Act has the potential to be a “revolutionary development” for hedge funds although managers have been urged not to get ahead of themselves, experts have said at SALT 2012 in Las Vegas.

The legislation amends Regulation (d) of the 1933 Securities Act and will enable hedge funds to advertise and market to accredited investors in public. “This is a major change for the hedge fund landscape. Congress has given the Securities and Exchange Commission (SEC) 90 days to sort out all of the changes. Whether this will happen on time is open to debate because of the backlog of other initiatives the SEC has to contend with. There are a few details the SEC has to iron out first although I am confident these will be resolved,” said Hillel Bennett, partner at the private funds group at law firm Strook & Strook & Lavan.

All of the panellists – some of them not disinterested parties however – anticipated a surge in hedge fund advertising and marketing. “Historically, when businesses, which have been prohibited from advertising their products are given the opportunity to advertise, they embrace it. It happened with pharma, for example,” commented Tarik Sedky, founder of MN&P, a marketing firm. “If you look at comment letters to the SEC, Blackstone, for example, has urged the SEC to go through with the reforms,” he added.

The rules have been praised, particularly by the Managed Funds Association, who said it would bring about greater transparency in what has historically been an incredibly opaque industry. Nevertheless, changes towards hedge funds’ attitudes to marketing and advertising will not be immediate. “I am optimistic that once the first institutional organisation starts to advertise and market publicly, others will follow,” commented Jennifer Prosek, managing partner at CJP Communications, a PR firm.

Managers currently have to be very careful when discussing their products in the public domain – for example, at seminars or in publications. Many compliance professionals and lawyers encourage hedge funds not to speak to the press at all about their products so as to avoid accusations of advertising. Some lawyers even argued hedge funds’ websites needed to be as vague as possible so as not to incur regulators’ wrath.

“I believe hedge funds’ websites are certainly going to become more savvy with managers employing search engine optimisation tools to aid their development,” said Victor Park, president at Alternative Assets, a capital raising firm.