After 80 Years, New Ruling Allows Hedge Funds To Finally Advertise

After-80-years,-new-ruling-allows-hedge-funds-to-finally-advertise

Hedge funds will finally be able to advertise. Announced today after the SEC voted 4 to 1 in favor of hedge fund advertisement, this will be the first time in 80 years that this is permitted.

The advertising ban was lifted as a part of the JOBS Act (Jumpstart Our Business Startups), which aims to making raising funds easier for startups and small companies.  With this new rule, they are free to advertise for any amount of money.

It changes the whole paradigm of who you can talk to,” Brian J. Lane, a former division director at the SEC and now a partner at Gibson, Dunn & Crutcher LLP, told Bloomberg. “Hedge funds will benefit because they have the most restrictions on their ability to communicate more broadly about different funds coming to market.”

As of now, hedge funds are only allowed to solicit accredited, wealthy investors who are less prone to make financial mistakes and can afford dramatic losses. The new ruling allows hedge funds to advertise via billboards, mass emails, and to online audiences, but they’ll probably be taking it slow.

According to David S. Guin, a partner at Withers Bergman LLP—whose clients include hedge funds—print and TV ads are probably out of the question. “You wouldn’t expect the type of person who is typically sought as an investor to be investing off of an ad in a newspaper or magazine,” Guin told Bloomberg.

Barbara Novick, a vice chairman at BlackRock, also addressed advertising potential from a different angle, noting that “potential investors are not likely to be deluged with advertisements, in part because firms don’t want to waste money trying to reach people who are not qualified buyers,” she told the Washington Post. She expects hedge funds to take advantage of the new rule via their own websites and freely discussing their products at conferences.