Key changes in hedge fund regulatory regimes globally

According to information received as part of the Third IOSCO Hedge Fund Survey, some changes have been made that are of interest to the global hedge fund industry. These changes have been made in the USA, Europe, and the Asia/Pacific region.  

United States regulatory developments summary

Jumpstart Our Business Start-ups Act (JOBS Act) means that now hedge funds can make public offers and advertise generally, whereas they weren’t able to previously. This applies so long as the investors are accredited and verified as such by the issuer of securities. This is New Rule 206 (c).

More information is now required on Form D so the US regulator can evaluate general solicitation and its impact on investors in the private market. Issuers must file Form D prior to advertising or soliciting, and at the completion of the offer.

Regulatory change in Europe

In 2013 the Alternative Investment Fund Managers Directive (AIFMD) was set up to create a smooth and comprehensive regulatory and supervision framework for alternative fund managers. European member states had to have the new regulations in place by mid-2013.

Changes include more extensive and regular reporting obligations and permission sought to advertise funds to institutional investors within the European Union. A Member State can allow funds to be marketed that are from outside the EU, but managed by an EU fund manager, marketed within that fund manager’s Member State, but not broadly across the EU.

Certain funds can obtain a non-EU passport, and freely market their products within the EU, so long as they comply with the requirements - these are not quite in place yet, but the European Commission, European Parliament and European Council are working on it.

In 2014 transparency requirements were increased.

Asian regulatory changes

As of 2012, fund management companies must be licensed or registered in Singapore, with the establishment of admission criteria – capital and competency being the major two, but business conduct also counting towards approval.

April 2013 saw revised capital requirements for capital markets services licensees, enhancing risk sensitivity of risk-based capital frameworks. Financial resources must be maintained in combination with risks.

Australian regulatory changes

The Australian Securities and Investments Commission (ASIC) has made numerous changes. The Shorter PDS Regime has caveats that exempt multi-funds, superannuation platforms and hedge funds.

Hedge funds are now required to provide more extensive reporting, particularly for prospective investors, to promote realistic and informed investing.

Registered managed investment schemes (MIS) have had several changes, including new guidance. Digital information has been given the green light, as ASIC is keen to encourage new and innovative ways to educate investors to ultimately improve investor outcomes.

India’s regulatory updates

New regulations require Category III AIFs to raise funds only through private placement by sophisticated investors, and the manager or sponsor of the AIF must have a continuing interest of 5 per cent of the corpus of the fund or rupees 10 crore, whichever is lower, to ensure ‘skin-in-the-game’ and alignment of interests. Investment flexibility has been allowed except for some conditions.

Source FR27/2015