SEC Advertising Rules for Investment Advisers Globally |

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SEC Advertising Rules for Investment Advisers Globally

Dechert recapitulates rules for private funds

Though long-established hedge fund managers are likely to be familiar with US advertising rules The Hedge Fund Journal sometimes gets queries from newer and smaller managers. Lawyers Dechert LLP recently held a refresher seminar entitled ‘US Advertising Rules for Investment Advisers’ for their clients, and separately provided THFJ with a briefing on the topic from which we extract some high level takeaways. The apparently widespread misconception that hedge funds could not advertise prior to the JOBS Act being signed into law in April 2012 may have arisen from very few hedge funds having ever advertised (pre or post JOBS Act) in the common parlance sense of the word. The JOBS Act opens the door to ‘general solicitation’, and ‘general advertising’ but “it is subject to uncertainty so most managers prefer to rely on the Rule 506(b) Reg D private placement exemption from registering securities with the SEC,” says Karen L. Anderberg, Financial Services Partner at Dechert LLP. She is of the opinion that the SEC advertising rules under the Investment Advisers Act of 1940 will anyway still apply to managers offering funds via the 506(c) exemption from registration under the Securities Act of 1933, which was introduced in 2014.

Even within the same country, the USA, different regulators babble in many tongues and Dechert’s briefing only considered SEC guidance for investment advisers and private funds, and not SEC rules applying to US registered ‘40 Act mutual funds, nor FINRA’s rules for broker dealers selling funds, nor CFTC/NFA guidance for CTAs and CPOs (any of which may also apply to managers registered with multiple regulators - Dechert runs separate events to update clients on these). Some of the guidance on advertising could also apply to advisers who are not registered with any regulator, as it comes under the more general umbrella of anti-fraud provisions. These are found in Section 206 of the Investment Advisers Act of 1940, which intends to safeguard against fraudulent, deceptive or manipulative conduct. So, investment managers that are not fully SEC-registered such as “exempt reporting advisers – including many UK hedge fund managers – can still be covered by the ant-fraud rules even if they are not covered by the full substantive provisions of US law” stresses Anderberg.

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INFORMING THE HEDGE FUND COMMUNITY With access to some of the industry’s biggest names and an astute and talented group of writers and contributors, The Hedge Fund Journal has established itself as a trusted source of information on the hedge fund industry.

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