April 4, 2012
- in Uncategorized by schooloftrade
Get a piece of my hedge fund!
THE JOBS ACT WILL LIFT A BAN ON ADVERTISING BY HEDGE FUND AND PRIVATE EQUITY FIRMS, BUT WALL STREET MAY COME TO REGRET IT.
FORTUNE — Private equity doesn’t have to be so private anymore. Buried deep in the recently passed JOBS Act bill is a provision that lifts the old Depression-era ban on advertising unregistered private placements to the general public. That means it will be possible for hedge funds and private equity firms to take out full-page ads in newspapers, purchase radio spots or even buy commercial time on television. President Obama is expected to sign the bill Thursday.
Wall Street may be elated now, but the industry may come to regret this fundamental shift in their business. While the change is expected to make it easier to market private placements, it also drops the mystique of exclusivity the industry has used to draw in high net worth clients. The change also raises the bar on disclosures as funds will now be able to talk publicly about their investment returns and strategies, forcing a new level of openness in the industry that many managers may find uncomfortable. And most troubling, the lifting of the veil exposes the industry to fraudsters looking to cash in on the public’s naiveté on alternative investments.
The JOBS Act, which stands for Jumpstart Our Business Startups, was sold to the American public as a bill that would help small businesses grow and create jobs. In reality, the bill is really a series of regulatory rollbacks that mostly benefit Wall Street and Sandhill Road and does little, if anything, to help Mom and Pop startups hoping to make it big on Main Street.
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