Wall Street Reform and Consumer Protection Act
If you’re familiar with Eze Castle (and since you’re reading this blog, you probably are!), you already know that we regularly monitor the headlines for anything and everything to do with hedge funds. A topic that very regularly arises is the likelihood of regulation. Historically, hedge funds have been often misunderstood and very loosely regulated. Although it is well-known within the industry that hedge funds are not to blame for the recession, they are often the focus of regulation talk these days. This week has been especially news-worthy and even contentious.
June 25, 2010: House-Senate panel announced acceptance of revisions to the “Wall Street Reform and Consumer Protection Act,” which will require many investment advisers to register with the SEC. It will also impose new disclosure and recordkeeping requirements on these advisers. For more information on this act, please read Bingham McCutchen’s recent Client Alert.
The news has not been met with unanimous approval, with many calling this an unfair tax on hedge funds. Others are welcoming the "tax" as a quick fix to many cities who have been hit hard by the recession. New York could raise an extra $50 million a year by collecting income taxes from people who work for hedge funds in the state but live elsewhere, according to a legislative plan to raise revenue. Check out Tuesday's Reuters article, New York state may tax out-of-state hedge fund execs, by Joan Gralla.
Additionally, The Alternative Investment Management Association (AIMA) responded to the act, voicing concern over taxing larger U.S. hedge fund managers to finance the cost of the financial-regulation bill, saying the industry has been "singled out for more onerous treatment. If this tax is targeted at perceived wrongdoers or those who caused the crisis, hedge funds had nothing to do with the cause of the crisis, and there has been no finding before, during or since the crisis that hedge funds cause increased risk to financial stability. On the other hand, if the tax is meant to finance the public goal of improved financial stability, then all market participants should be made to contribute, not just hedge funds and banks. There is no reason to single out our industry in this manner."
Carefully consider the arguments, and if you’d like, check out the Managed Funds Association’s website (www.managedfunds.org) to learn more about their “Legislative Action Alert: Help Fight Congress’s $19 Billion Stealth “Tax” on Hedge Funds.”
Eze Castle will closely monitor these updates and prepare seminars, webinars, and other resources to help you and your fund prepare for regulations. In the meantime, be sure to check out our Best Practices for Hedge Funds Knowledge Center and Privacy Compliance Knowledge Center to help you stay a step ahead!
Where do you fall on this debate? Are hedge funds being victimized or finally being held accountable? Be sure to leave comments for us and let us know where you see Hedge Fund Regulation headed in the coming months and years.
Thanks for reading!