<<Or will it be just another LTCM, bailed out by Wash-in-'t-wan and allowed to fade out into CH11 oblivion? Will we just pay for it in our taxes?>>
No, don't think we'll see many bailouts. Look here a new day is dawning:
SEC Begins Hedge Fund Investigation
Fri May 24, 3:47 PM ET
By JUDITH BURNS, Dow Jones Newswires
WASHINGTON (AP) - The Securities and Exchange Commission (news - web sites) is beginning a formal fact-finding investigation of largely unregulated hedge funds to determine if its traditional hands-off approach is in the public interest, SEC Chairman Harvey Pitt said Friday.
"We're going to have to look at the current regulatory scheme," Pitt said at a news conference following a speech to the Investment Company Institute.
Hedge funds have largely avoided regulation by marketing themselves to wealthy, sophisticated investors. But in his speech to the mutual fund group, Pitt noted the recent boom in hedge-fund assets raised questions about whether such funds are targeting less sophisticated investors.
"When they start selling interest to the average person on the street, it's time for the SEC to look at it," Pitt told reporters.
Pitt said he doesn't want to prejudge the outcome of the SEC's investigation, which he said will run "as long as it takes our staff to understand the way hedge funds are operating."
The probe will focus on fraud at some hedge funds, conflicts that might arise when hedge funds are managed alongside mutual funds and marketing hedge funds either directly or indirectly to retail clients.
Turning to mutual funds, Pitt said the SEC is examining so-called 12b-1 plans, which cover marketing and distribution costs. While the plans are supposed to be temporary, distribution at many funds would collapse without them, Pitt noted.
Pitt didn't offer specifics, but said the SEC will look at 12b-1 plans, directed brokerage and other arrangements, including whether fund directors give them sufficient consideration.
"We are also considering whether investment advisers must disclose proxy-voting policies and their votes, particularly on contested matters," Pitt said.
Labor unions and other large, institutional investors have petitioned the SEC to require mutual funds to come clean on how they vote proxy shares.
Pitt said whatever the SEC decides, mutual fund advisers should explain their policy on proxy voting and cast the votes in the best interests of the fund and fund shareholders.
Improved fund disclosure is on the SEC's agenda as well. Pitt said recently proposed changes to mutual fund ads are only a first step, complaining fund documents aren't "user-friendly," and appear to be written more to fend off lawsuits than inform investors.
(cont)
story.news.yahoo.com |
