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HFA: US regulators ‘being set up for failure’

Friday 23 December 2011 – by [email protected]

The vice president of the Hedge Fund Association reflects on a turbulent year for hedge funds and regulators in the US, and warns that 2012 may not see the roll back of regulations that many demand.

For Ron Geffner, vice president of the Hedge Fund Association, the past year has not thrown up too many surprises on the regulatory front – although that is small comfort for either him or his US-based members.

With the Dodd Frank Wall Street Reform and Consumer Protection Act approved in July last year, 2011 was always going to be a frenetic 12 months for sweeping new rulemakings.

“It was pretty clear the direction in which we were going based on Main Street’s cries for further controls, the fact that Wall Street has been unchecked for several years, and that we have gone through deregulation over the last ten years.”

Geffner however equates the “overregulation” to something of a drastic New Year’s Resolution by Washington. “It’s like a person who gains ten pounds over the holidays and goes overboard on their diet.”

The regulatory expert, who heads up the financial services group of New York law firm Sadis & Goldberg and is a regular on channels such as CNBC and Bloomberg, insists new rules are creating negative pressure on the industry. He picks out new trader reporting requirements and the registration of large investor advisers as two serious bugbears.

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The 2011 regulation that has him most agitated however is the registration requirement, approved by the Securities and Exchange Commission in June. In the words of SEC chairman Mary Schapiro, it was designed to ensure that advisers who previously operated “under the radar” will now be monitored.

However the requirement has had the hedge fund industry up in arms. It was also enough to make billionaire investor George Soros decide in July that his investment firm, Quantum Fund, would hand back client money and become a fully family-owned business after 40 years of trading.

Geffner takes particular issue with a $150m (€115m) threshold, under which advisers are exempted, as being far too low, arguing it will unnecessarily capture smaller firms who cannot afford the associated compliance burden.

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